Some WeWork board members want to remove Adam Neumann as chief executive of the company, the Wall Street Journal and other outlets reported Sunday, citing people involved in the talks.
Bloomberg and the New York Times also reported that Softban (SFBTF)k, The We Company’s largest investor, seems to be in favor of replacing Neumann. CNBC reported Softban (SFBTF)k CEO Masayoshi Son supports Neumann’s removal, according to a person familiar with the matter.
The board could meet as early as this week to discuss a proposal for Neumann to become the company’s nonexecutive chairman, the Journal reported. This would allow him to stay at the co-working real estate company he built over the past decade while bringing in new leadership to shepherd We through its IPO.
WeWork declined to comment for this story, citing the quiet period ahead of its public offering. Softbank did not return a request for comment.
Softbank has invested billions into The We Company. Ronald Fisher, vice chairman at Softbank, and Mark Schwartz, former board director at Softbank, joined the company’s board as part of a 2017 $4.4 billion investment in We by Softbank. But Neumann, who is one of seven board members, is We’s controlling shareholder, giving him the power to fire the board.
The news comes at a tumultuous time for The We Company and its IPO ambitions.
The company last week delayed the public offering until at least October, and its potential IPO valuation continues to fall. On Wednesday, a Wall Street Journal report detailed Neumann’s unusual leadership style and potential conflicts of interest. And on Friday, a Fed official said he worries co-working spaces like WeWork could worsen commercial real estate losses in the next recession.
The money-losing but quickly expanding company needs the infusion of cash an IPO would bring to fuel future growth. But since it publicly filed paperwork for an IPO last month, it has been criticized for its governance structure and it has reportedly considered cutting its IPO valuation more than in half from $47 billion to as low as $10 billion.
The hurdles for WeWork’s IPO may be a signal that investors are losing patience with a path many other tech start-ups have taken: Pursuing a public offering with a high private market valuation, even while losing billions of dollars and being run by a founder with outsized voting control.
It is unclear whether board directors could actually push Neumann out as CEO. We created multiple classes of stock, giving Neumann voting control over the company’s decisions, according to its IPO prospectus. After facing criticism over the deal, Neumann repaid $5.9 million that The We Company had paid him in exchange for his trademark of the word “We.” Even still, Neumann retains a controlling stake.
That move — along with the addition of a new board member and changes to We’s corporate governance structure — was made in an effort to salvage the company’s IPO ambitions. Earlier this month, We also scrapped a plan detailed in its prospectus that would have allowed Neumann’s wife, Rebekah, to pick the company’s next CEO, instead opting to rely on the board.
If he were removed as CEO, Neumann would join another controversial CEO pushed out of the top leadership position as his high-value tech company struggled to manage its growth and prepare for a public offering: Uber founder Travis Kalanick. Kalanick, then also the company’s majority shareholder, was forced to resign as Uber’s CEO in 2017 after pressure from investors, in the wake of company culture concerns and criticisms over Uber’s treatment of drivers.
But removing Kalanick didn’t save some investors from going into the red after Uber made its Wall Street debut earlier this year. Since its public listing in May, Uber’s stock has fallen more than 20% from $41.57 to $32.60.
Correction: An earlier version of this article incorrectly reported on Benchmark's investment in Uber.