This past summer, the startup WeWork heavily promoted what it promised would be a historic initial public offering (IPO). Analysts seemed to agree: Goldman Sachs estimated the office space leasing company could reach a valuation of $96 billion upon its stock market debut. When WeWork submitted the first documents for its IPO, though, the company settled on a potential valuation of $47 billion as it promised to change the world as well as the office leasing industry. Co-founder and CEO Adam Neumann made most of these lofty claims himself, employing a rockstar persona that had won over so many big investors in the past.
While all of this hype drew a ton of attention to WeWork’s upcoming IPO, it also convinced business insiders and journalists to scrutinize Neumann’s leadership of the company. What they discovered was not encouraging. First of all, WeWork’s much celebrated office culture featured a number of problems. Employees often worked long hours for company stock rather than a substantial salary. For those who stuck around, Neumann rewarded their hard work with huge parties featuring celebrity performers and generous amounts of tequila. This created an environment that many staffers considered unprofessional as well as outright dangerous, leading to high turnover.
Even more problems arose once outsiders started examining WeWork’s finances. Along with losing $1.6 billion last year, Neumann also made money from the company in a number of suspicious ways. For example, he purchased many buildings himself and then leased them back to WeWork to rent for office space. Neumann even convinced the company to purchase $6 million worth of “We” related copyrights from him. Most distressingly for investors, though, Neumann had already cashed out more than $700 million worth of WeWork stock before the IPO talks had even begun. Outrage quickly began to mount against the company, ultimately leading to both the removal of WeWork’s IPO and Neumann as CEO. After falling from a valuation of $47 billion to potentially zero, experts predict the company will massively downsize. While that’s bad news for the investors who poured billions into WeWork, it’s even worse for employees who were paid in stock that could now be worthless.
- How did former CEO Adam Neumann contribute to WeWork’s recent downfall?
- Should WeWork employees seek legal action against Adam Neumann? Why or why not?