WeWork’s disastrous attempt to go public has been full of twists. But this week has delivered the biggest shocker: After reportedly losing the confidence of key board members, co-founder Adam Neumann is out as CEO.
Neumann will continue as non-executive chairman of the board, the company confirmed following news reports.
“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction,” he said in a statement. “I have decided that it is in the best interest of the company to step down as chief executive.”
His departure is highly unusual in the startup world, which has historically rewarded high-profile and freewheeling entrepreneurs. Such founders have typically been allowed them to maintain tight control of their companies even as they tapped public markets.
But in recent weeks, the governance structure at WeWork, along with Neumann’s own behavior, has come under the microscope. The company’s business model has also faced major doubts after it became clear that WeWork is burning through money.
The We Company — which had been previously valued at $47 billion by top investor SoftBank — was said to be looking at an IPO valuation closer to $20 billion.
For startup executives, it’s a warning. Investors seem to be losing patience with lofty valuations at loss-making companies. See also Uber and Lyft, whose shares have plummeted since their flashy IPOs earlier this year.
According to my CNN Business colleague Sara Ashley O’Brien in New York, Neumann will no longer have majority voting control. He will have three votes per share, down from 20 votes per share, as outlined in the company’s original IPO paperwork.
The rub, from Sara: “It is unclear if The We Company will go public anytime soon, even with the leadership change.”