WeWork co-founder and current CEO Adam Neumann has stepped down from his position at The We Company, WeWork’s parent company, citing the pressure from the company’s troubled IPO, according to a statement released by WeWork on Tuesday afternoon. The company has had some trouble going public since it was officially announced over the summer. After The We Company failed to secure an initial valuation of $40 billion, investors grew worried that a business such as We Work would not be recession-proof. The company was forced to put a hold on its IPO, but rising tensions over going public created more issues for the budding company than it originally had.
“As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade,” Neumann said in a statement released by WeWork on Tuesday. “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. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business,” said the former CEO.
Neumann’s position will be taken over by Artie Minson, the former co-president and CFO of the company, as well as Sebastian Gunningham, the former vice-chairman. Adam Neumann served as the co-founder and CEO of The We Company over the last nine years, since the company was incepted in 2010. Since then, the co-working brand has grown from one location in New York City to 111 cities across 29 countries, with flexible memberships that let WeWork members commute between office spaces with relative ease. Hundreds of thousands of WeWork members can access the spaces for a monthly fee, gaining access to chic office space within a broad network of startups and freelancers from around the world.
The We Company Has Had Trouble Going Public
WeWork paved the way for the co-working business model to grow around the world and changed the way office spaces and office culture operate for the foreseeable future, but that doesn’t mean it was ready to enter Wall Street quite yet. Word got out that WeWork would be preparing to go public earlier this year, and after a final round of funding in July the company was prepared to list its IPO at a share price that would value the company at around $47 billion. After a round of valuation from venture capitalists, though, the company announced it would have to list its IPO at a share price that valued the company at less than half of that, at just around $20 billion.
The news created distrust among potential investors, who felt that the company’s luxury spaces and services catering mainly to startups and freelancers would not survive in the wake of a potential recession. This news delayed the IPO from September to a potential launch later in the fall, but the controversy surrounding the IPO created more distrust among investors and forced the company to consider delaying the offering until next year. Experts are wary that the company will be successful in going public, as it seems to fit the narrative that many failed companies share in wanting to prosper despite little trust in their success. Though this sounds uplifting, it can be a recipe for disaster on Wall Street, where miracle stories are regarded as a financial risk rather than an admirable tale of hard work and dedication.
San Francisco-based John Meyer, Managing Partner at Starship Capital, commented that:
Regardless of what happens with WeWork’s IPO price or CEO search, the company remains a sea full of red flags. The financial reporting used in their fundraising process has been incredibly suspicious and I now see a road in-which WeWork and founder Adam Neumann could end up proving to be a fraud bigger than Theranos.