- Adam Neumann is stepping down as WeWork’s CEO, citing intense public scrutiny that has become a distraction in running the firm.
- WeWork will name two current execs, Sebastian Gunningham and Artie Minson, as permanent co-chief executives.
- Minson, currently co-president and CFO, joined the company in 2015 from AOL. Gunningham left Amazon last year to become vice chairman at WeWork.
- Neumann will stay on as chairman, and his voting power will drop to 3 votes per share, down from 10 votes currently.
- The company’s biggest backer, several other investors, and some board members were reportedly plotting to remove Neumann as CEO after the flexible office company postponed its initial public offering amid concerns about its business model, valuation, and governance.
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Adam Neumann is stepping down as CEO of WeWork, with the co-working giant’s controversial chief and co-founder citing intense public scrutiny he says had become a distraction in running the company.
WeWork had delayed its highly anticipated public offering after mulling a huge valuation cut to lure investors spooked by its wide losses and unconventional corporate governance.
WeWork will name two current execs, Sebastian Gunningham and Artie Minson, as co-chief executives, according to a statement from the company. Neumann will stay on as chairman.
Neumman’s voting power will drop to 3 vote per share, down from 10 votes currently, a source familiar with the matter told Business Insider.
"While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive," Neumann said in the statement.
Minson, currently co-president and CFO, joined the company in 2015 from AOL. Gunningham left Amazon last year, where he was a senior vice president of seller services for more than a decade, to become vice chairman at WeWork.
The move comes after board members were reportedly mulling how to push out the WeWork co-founder and controversial CEO after the company delayed its initial public offering amid concerns about its business model, valuation, and governance.
Neumann co-founded WeWork with his wife, Rebekah, and architect Miguel McKelvey in New York in 2010. Since then, the company has expanded to 528 locations in 29 countries. WeWork, now known as We, ushered in a new way to think about designing and leasing office space - but remains far from profitable.
In a filing ahead of its planned IPO, We estimated that market opportunity for its business could be $1.6 trillion, but in the first half of 2019, it lost $690 million on $1.5 billion in revenue. That filing also detailed Neumann's web of loans, real-estate deals, and family involvement with the company. Over the last month, We worked to address some of those issues, but the company's unusual governance and concerns about its resiliency in an economic downturn were still a red flag to some investors.
The company took the drastic step of mulling slashing its IPO valuation to as low as $10 billion, according to media reports - well below the private valuation of $47 billion it secured in January. The company also needs to raise $3 billion in a public offering in order to unlock a $6 billion bank financing package.
Per We's S-1 filing, Neumann does not earn a salary and would not be entitled to severance if he was no longer CEO. In the first half of 2019, WeWork granted Neumann options on common stock that would vest based on a successful IPO and the company hitting certain market capitalization, up to $90 billion.
Investors had proposed ousting Neumann by leveling legal threats at him over "self-dealing," the New York Times said. Neumann holds stakes in companies that have bought properties then leased them to WeWork, giving him conflicting incentives as both landlord and tenant.
Other shareholders were calling for an inquest into Neumann's use of company money and whether he took drugs while working, The Times said. The Wall Street Journal last week recounted claims from anonymous sources that Neumann smoked marijuana on a private flight from New York to Israel. The Journal said the jet's owner recalled the plane before Neumann reboarded after the flight crew discovered more of the drug stuffed in a cereal box for the return journey.
We declined to comment on the drug allegations. A We spokeswoman declined to comment on this story to Business Insider.
After an overhaul of its governance failed to relieve investors' concerns, We faced the prospect of failing to raise the $3 billion needed for it to unlock $6 billion in bank financing, leaving it with little choice but to delay its public debut.