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Some WeWork Board Members Seek to Remove Adam Neumann as CEO
- tempsy 7y agoDidn't investors, especially SoftBank, enable this behavior? They deserve as much blame for this mess as he does, if not more.
- raverbashing 7y agoProbably. It would be funny if this blew up in SoftBank's face. I think it will make even Theranos sound more sensible. Sure, the product exists and it's good but the "business plan" and its assumptions and business structure don't make much sense. Though I don't know how long they will survive without any more cash injections in the short term due to all their rental liabilities.
- tempsy 7y agoNah, this isn't like Theranos. In reality, it is a very good product with slim margins. The reason it is losing so much money is because it is expanding quickly to show that it is a "high growth" Unicorn company. It isn't that it's a scam, it just puts it is a non-tech/non-SaaS category. Every founder/CEO wants to tell a huge growth story. If private investors are buying that then it's just that they miscalculated, but not defrauded.
- bhouston 7y agoSlim margins means it isn't a great product, at least by standard business definitions. A product with slim margins is one that you divest from so you can focus on the products with good margins.
- tempsy 7y agoI was referring to the quality of the product from the customer POV.
- purple_ducks 7y agoThey rent office space.
- AlexandrB 7y agoMoviePass was an amazing product from the customer POV. Not a viable business though.
- smacktoward 7y agoFrom the customer's POV, selling dollar bills for fifty cents each is also a high-quality product.
- tempsy 7y agoNo not really. Again, they lose billions right now because it costs a lot to build out new buildings. Then as a building matures they recoup these costs through the memberships. The more mature offices are profitable. It just isn’t necessarily tech/VC level profits.
- throwaway2048 7y ago
- the_watcher 7y agoThere are lots of good businesses that operate on thin margins. They're good businesses, which is why you can divest them to investors who want to run a good business. What they're not are businesses that should trade at anything close to software revenue multiples.
- tyingq 7y agoIt's also losing money because the CEO is converting it to personal wealth.
- tptacek 7y agoHelp me understand how this is a coherent argument. I could see making the argument that investors share some of the blame for what the CEO did. How could they have more of the blame?
- tempsy 7y agoBecause they decided to invest and never demanded oversight or questioned his voting power with each new term sheet they handed to him? The point of the board is in part to keep the CEO in check. They had many opportunities to do so well before weeks before the now shelved IPO roadshow.
- jakelazaroff 7y agoYeah, but all that would have been fine if he’d acted responsibly. Obviously giving him that much power is a dangerous game to play, but it doesn’t absolve him of responsibility for his behavior. Ultimately he — not the investors — is the one who built this sandcastle on partying, self-dealing and a cult of personality. One of the things about blame is that it’s never zero sum, and in this case there’s more than enough to go around.
- mpalmer 7y ago> Yeah, but all that would have been fine if he’d acted responsibly. > if he’d acted responsibly > if The "if" is the point. SoftBank had the ability to eliminate the risk of this "if", and didn't.
- jakelazaroff 7y agoSo what you’re saying is: if someone doesn’t prevent you from doing something, they should shoulder more of the blame than you do for actually doing the thing?
- tempsy 7y agoTake an extreme example. If a VC decided to invest $1b in a lemonade stand run by a 7 year old and the whole thing falls apart, then yes I would blame the VC for not conducting proper due diligence and enabling someone who neither had the right business for $1b or was the right leader to execute on that business in the first place.
- sciencewolf 7y agoSurprised it took this long!
- toomuchtodo 7y agoPonzi scheme Hail Mary. Edit: This isn’t meant to be flippant. There is literally no value in this company and its current owners are trying to dump it on a greater fool.
- moltensodium 7y agoDoes WeWork not have a crunchbase profile page? I'm curious about who all managed to get out before the Softbank fiasco. Were employees allowed to sell shares on the secondary market, or are they all effectively hosed now?
- ascorbic 7y agohttps://www.crunchbase.com/organization/wework https://www.crunchbase.com/organization/wework
- moltensodium 7y agoThanks, not showing up in search for some reason.
- dehrmann 7y agoUnless they're leasing out space at a loss, they should be able to turn a profit by reining in costs and slowing growth. Some of its harshest critics said it needs to be valued more like Regus and not like a tech company.
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- ben_jones 7y agoPlaying Devil's advocate imagine having potentially millions of dollars invested in tearing you apart - going through every piece on online history, video, etc., trying to find something juicy to tank the company you've tried so hard to build.
- CalChris 7y agoI see your point but WeWork hasn't IPO'd yet. So there are no short sellers yet.
- throwaway2048 7y agoblaming "short sellers" is a slightly more sophisticated sounding "haters gonna hate" in most situations, but in reality its equally as dumb.
- moltensodium 7y agoWhat company? What was built? It's a money destruction machine, not a business. They have no plans or experiments or research moonshots that they expect to be profitable, ever.
- elliekelly 7y agoImagine trying so hard to build a company and getting to the 11th hour before the IPO and being stymied by something as simple as basic corporate governance. That’s like trying to launch a tech company but “forgetting” to set up the servers and hoping if you talk about your vision and say “We” enough no one will notice/mind.
- rvz 7y agoLooks like the IPO delay has caused a back-firing to the CEO. According to him, it's more like MeWork.
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- draw_down 7y agoIf nothing else, I respect the grift. He’s already cashed out hundreds of millions and now he’s going to miss out on all the “fun” of this company attempting to go public.
- bitL 7y agoDidn't the two head honchos already redirect some cashflow to their accounts? I think they and their grandchildren will be fine... Softbank on the other hand...
- MobileVet 7y agoYes... And Softbank was so high on kool-aid they let Adam sell them $700M of his stake. Absolute worst use of investment at that level... Taking a little out to derisk yourself after a B or greater round is reasonable. Taking almost 10% of a round is obnoxious.
- misiti3780 7y agoya i was surprised that he was able to extra so much money also.
- jeremyjh 7y ago> Mr. Neumann still has allies among the directors and the ability to fire the entire board thanks to shares he controls that carry extra votes. It defies imagination that a fund would put 10B into a company whose CEO is accountable to no one. I think we may also see new leadership in SoftBank, or at least their next fund.
- ink_13 7y agoThis is true of many large companies today, though. Facebook comes to mind.
- tyri_kai_psomi 7y agoWhat I don't understand is what is so mind boggling to GP? This is the norm for the vast majority of private companies.
- kevinmchugh 7y agoThat vast majority never goes public or gets close to doing so, right? Those companies aren't worth a billion or more
- willwagner 7y agoI think if you are including coffee shops, dry cleaners, and the rest of small businesses that are self-funded, I agree. If you look at VC backed high tech startups, I don't think that is the norm: https://www.capshare.com/blog/4-key-insights-from-5000-cap-tables/ https://www.capshare.com/blog/4-key-insights-from-5000-cap-t...
- throwawayjava 7y ago> high tech WeWork?
- wongarsu 7y agoWeWork presents itself as tech startup and is often presented that way. They are really more a real estate business, but in this context their self perception is the only relevant view
- exogeny 7y agoConsidering he has the votes to fire the entire board, I'd be shocked if this happens. Softbank is completely fucked.
- greenyoda 7y agoIf he fires the whole board, wouldn't that add further doubt about the company's governance and reduce the expected value of any future IPO even further? It doesn't seem like that would be in his best interest.
- JumpCrisscross 7y ago> It doesn't seem like that would be in his best interest Rationally, he might be able to extract more cash out of the business running it into the ground than by having it saved by someone else. Delusionally, he might think he's the only one who can run WeWork.
- DebtDeflation 7y ago>If he fires the whole board It's game over at that point. Kiss the IPO goodbye, kiss the $6B in lines of credit goodbye, kiss any further investment from Softbank goodbye. With their burn rate, they then have MAYBE another 6 months before they become insolvent. That having been said, it would be quite the Pyrrhic Victory for Softbank, might even mean their demise as well.
- rossdavidh 7y agoIt depends, I suppose, on how soon We needs more investor money. If he actually exercises his right to fire the entire board, it seems like it would be hard to get somebody else to chip in big money. On the other hand, it could be that Softbank knows it won't work, but feels they have to be seen attempting something.
- perl4ever 7y ago"We needs more investor money" I read this and heard Gollum saying "We wants it. We needs it."
- deleted 7y ago[deleted]
- MobileVet 7y agoWith $700M extracted and long term leases to the company for properties that he owns... One could easily ride off into the sunset. It will be interesting, and insightful, to see if that is the tact he takes. If he does... It will add credibility to the already strong case for this being deliberate deceit versus unchecked ignorant hubris.
- blantonl 7y agoHe’s quoted as saying he wants to be “President of the World” and live forever. This guy isn’t riding off into the sunset.
- hef19898 7y agoSo the bank robber type who gets caught after the perfect crime for picking up a penny from the floor or for having one last job too many?
- ineedasername 7y agoBoth maybe? Trying for the We trademark money after cashing out 700m seems like picking up the penny, and the various We spinoffs seem like the job too many.
- deleted 7y ago[deleted]
- ceejayoz 7y agoHe may wind up dragged behind the horse into the sunset, though.
- Havoc 7y agoModest too I see
- hef19898 7y agoI'm not sure if any other employee in any other company could get away with something like that. Sounds like a clear conflict of interest to me. Same goes for some of Elon's and Tesla's business transactions, so. Sounds like an overall bad idea to me, just how SoftBank accepted any of it is beyond my imagination. I'm all for letting founders cash out to a certain degree before an IPO, but 700M and the lease agreements? Bot sure if that was a good deal for investors.
- KoftaBob 7y agoHe adds very little of value at this point, and only harms the reputation and uses it as a way to funnel VC money into his bank account.
- iamleppert 7y agoWhat kind of company that is controlled by a single man insists on branding itself as “we”? Even the name of the company is a bold-faced lie.
- stagger87 7y agoIs your argument that companies that use plural pronouns in their name should have certain types of ownership structures?
- cdolan 7y agoFirst rule of getting out of a hole is to stop digging. Honestly how did you make this logical jump? It’s pretty obvious to me the parent post was pointing out that there is a lot of irony in a company, completely controlled by one individual (or his wife if he dies), is named “We”.
- wavefunction 7y agoUnless it's the "royal We" and then it's even more potential delicious irony.
- some1else 7y agoI think his argument was that if a company uses the name "We", it should have a certain type of ownership structure. The interpretation could probably be further extended to other names that signify plural governance. That sounds reasonable to me. I can't infer ownership implied by all plural pronouns though, so I suspect your interpretation is probably too general.
- iamleppert 7y agoAt a certain point, you need to stop listening to what people say and start looking at what they do. In this case, there is a clear mismatch in terms of what Adam is saying and his behavior as the CEO of this company. If WeWork’s mission is really to be one of empowering people to work the way they want, its governance structure and actions by those at the top need to reflect those values. Put simply, the CEO himself isn’t living up to the core values of the company and needs to be dismissed.
- GCA10 7y agoLeaving aside all of the headline-making entertainment of Adam Neumann being Adam, the real problem here is that WeWork really doesn't have much in the way of enduring network-effect advantages -- even though it tried so hard to convince investors otherwise. In many tech-fueled marketplaces, getting big in a hurry is a practically unbeatable advantage. I saw this 20 years ago when I was tracking eBay. No end of little players would approach me and say: "I've designed a better marketplace than eBay. If I just had 1 million users, you'd see how good it is." But it was too late, and there was no way for them to go from 10 users, to 10,000, to anything bigger. Loyalties on both sides of the market were already sewn up. Both buyers and sellers wanted a deep, super-smooth market where they could transact 10-50 times a month without ever being frustrated by a lack of market depth. When people need a viable market many times a week, switching costs become unfathomably high. eBay owned that concept for as long as it would work. It's been basically the same story for Uber, Lyft, Twitter, etc. But this is not true the one-time need of renting this season's splashy workspace with free kombucha. Tenants pick their spot and then stay for 3 months, 11 months, three years or whatever. There's a little bit of shuffling around and re-transacting, but not nearly as much. Besides, if the WeWork concept is that good, it's easy to copy and does not need giant scale to work. That's totally different from trying to build the third ride-hailing service. In this case, someone who owns three office buildings in Chicago's West Loop can convert them to a WeWork clone and rent them just fine to people who want to be in that neighborhood. The fact that this new outfit (WeLoop) does not have a London outpost or a list of 75,000 other tenants in other states is irrelevant. Buyers show up for one transaction (get me a groovy office space in my neighborhood) and then they are done. That is already beginning to happen, in fact. Yeah, WeWork has a greater ability to serve large corporations that want an ever-changing blend of space in a lot of cities. But that's not its core market. And even if it is, WeWork isn't automatically better off than existing REITs that can tweak their multi-city properties as needed. So it's brave of Team Adam to go into a lot of cities all at once and tell people that this year's losses will soon give way to profits once the buildings fill up. But that doesn't seem to be happening on schedule. And even if WeWork eventually gets to breakeven, that just entitles it to compete against a lot of established players who already own better buildings in better locations -- and who can clone whatever elements of WeWork design seem appealing to customers. Getting access to capital on super-friendly terms gave WeWork the ability to build fast, almost regardless of what the short-term economics might be. But now access to capital is getting quite a bit harder. And that can feed on itself in scary ways. Once capital gets scarce, a lot of expansion plans get much harder to carry out. Now growth slows. And that makes investors more jittery. Borrowing rates go up; loan covenants get tighter, and equity dilution gets more severe. Growth shrinks further. Money gets tighter. In such situations, it takes a skilled pilot to land the plane safely, let alone regain altitude.
- akulbe 7y agoQuestion, because I don’t know how this works. Who sets the valuation on a company? Does a CEO have anything to do with that, or is it wholly external?
- goatinaboat 7y agoIf you declare your company has a billion shares and I buy 1 for $1 then you have a valuation of... one BILLION dollars. If I later buy 1 share for $2 then your valuation has doubled. That is basically SoftBank’s business model.
- Dunedan 7y agoBasecamp even made a headline out of it a while ago: https://www.linkedin.com/pulse/basecamp-valuation-tops-100-billion-after-bold-vc-investment-fried https://www.linkedin.com/pulse/basecamp-valuation-tops-100-b...
- misiti3780 7y agothat article is hilarious!
- kamyarg 7y ago> Basecamp is now a $100 billion dollar company, according to a group of investors who > have agreed to purchase 0.000000001% of the company in exchange for $1. Just wow, this is gold.
- 100-xyz 7y agoValuation is based on what percent of shares an investor buys for how much. eg; if I buy 5% (0.05) of a company for 100$. The company valuation would be 100 / 0.05 = 2000$. It can be a little more complicated with post and pre buy valuation, but that is the general idea.
- thedogeye 7y agoWeWork is a useful product. Office real estate is broken for startups. Landlords make us take 5-10 year leases when startup planning horizons are almost never longer than 18 months. WeWork earning 30-40% margins by allowing us to take shorter terms that better fit our needs. Should be a good business.
- cm2012 7y agoThe issue is if the global economy downturns fewer people want to rent short term, WeWork is still committed to paying the long term lease costs.
- shartshooter 7y agoShort term rentals are an inferior good. An economic downturn could lead to more business for them
- greglindahl 7y agoPast experience says WeWork will end up bankrupt. "This time it's different"
- Gene_Parmesan 7y agoAny earlyish startup (smaller than a certain size) that's facing cash flow problems during a larger economic downturn would likely just move to a remote-only model, maybe with very short-term rentals for high-stakes meetings. No, it's not ideal, but if the survival of the business is at stake, cutting out your coworking fees seems like the easiest way to reduce overhead. I'm no economist, but to me, it seems that short term rentals can't be an inferior good if a large percentage of startups are already currently using them. You'd need a majority of them to be leasing a traditional office space in order for coworking to be seen as a viable lesser option. And I don't really see larger, more established startups that do have traditional office space (like Duolingo for instance) moving out into a WeWork.
- 7y ago
- racecar789 7y agoI wish a company going public could only release one class of shares. One vote per share.
- throw554 7y agoI hung out with Adam a few times back in the early days of Green Desk. It depresses me to see what he has accomplished in 11 years vs. what I did (just the ordinary SE track...) oh well.
- jdani6 7y agoSo take an Uber to WeWork, jump on Slack and order DoorDash. The same people who partially financed those companies also funded 9/11 but few seem to care.
- soniman 7y agoThis has all happened before. The proto-WeWork was called HQGlobal and the firm behind it was Frontline Capital. The whole thing unraveled in the 2000 bust as the tenants all went out of business and canceled their leases at the same time. WeWork is not going to be pretty when the economy turns. Bill Ackman backed Frontline Capital and it pretty much sunk his first hedge fund, Gotham Capital.
- crb002 7y agoIt can work, but they need more anchors. Stripe, Gitlab, ... companies that are remote but have workers prefer to cowork. Economic downturn might actually help them if they can gobble long term low leases. More unemployed also means more consumer base outside big corporate America. Their biggest threat is small mom and pop coworking spaces like Gravitate in DSM. Geoff wouldn't sell for less than a massive premium, and nobody is going for WeWorks bad service if they tried to compete.
- cylinder 7y agoWhy on earth would stripe pay a middle man like WeWork to manage their office and lease?! Stripe is looking at buying an entire building. I'm pretty sure they can handle a 15 yr lease just fine. And don't need WeWork staff to decide what their office kitchens need.
- solidasparagus 7y agoI assume they mean using WeWork for Stripe's non-primary offices where flexibility is often more valuable.
- manigandham 7y agoStripe is at a size where they can easily afford all the flexibility they need without a middleman company.
- 7y ago
- ineedasername 7y agoIt seems too late for this to make much of a difference in IPO valuation for investors (really SoftBank) to get the exit they want. Neumann's actions may have been a catalyst, but now everyone is really questioning the "tech startup" valuation and unit economics.
- emagdnim2100 7y agoEveryone likes to pile on WeWork, and I get it, but as someone who dealt with both startup and solo office leases in the pre-WeWork era: my God is WeWork's model comparatively amazing as a customer. The spaces are nice, there are no headaches, you can purchase the exact amount of space and duration you need, and you have a guaranteed decent place to do some work or just hang out anywhere you travel. The "no competitive advantage / anyone can do this" crowd is sort of ignoring the fact that no one did, at least for folks that care about the things I mention.
- komali2 7y agoThere's definitely pay per 6 minute desks in every city I've worked in in the USA, did you mean something else?
- kunday 7y agoProf Galloway wrote an article just days ago laying out what will happen to we work given the IPO is shelved now. First one was to replace the CEO. https://www.profgalloway.com/wewtf-part-deux https://www.profgalloway.com/wewtf-part-deux
- pythonwutang 7y agoThis is just the beginning. Start microwaving some popcorn because this will be quite a glorious train wreck to watch! Hopefully the negative impacts are economically isolated.
- 19ylram49 7y agoMy popcorn got cold. This train-wreck is taking too long. The suspense is killing me.
- amos19870630 7y agoJust like Theranos, investors once again fell for the personality and didn't do their due diligence. Sure, the idea is great, but they have losses exceeding $1.5 B. That in itself would scare me.
- larkinrichards 7y agoI don’t mean to speak in support of the CEO, and I don’t say this to support WeWork. > The Wall Street Journal reported last week that Mr. Neumann had taken marijuana on a flight from New York to Israel. In this day and age, where we have businesses that legally sell weed, this sort of commentary appears to be a pointless inclusion of “salacious” details. It is irrelevant to the discussion of whether WeWork has a legitimate growth model or whether the CEO is doing the “right” thing. I suspect that SoftBank is attempting to win this battle in the court of public opinion, because they bought shares that didn’t have the same voting rights as Mr Neumann’s shares, and they now regret that decision.
- nradov 7y agoThe concern is not over the marijuana use per se, but over illegal drug smuggling across international borders. That shows a major lack of judgment and could have resulted in serious consequences for the charter company if they had been caught. Based on that behavior and other reports I suspect Adam Neumann suffers from narcissistic personality disorder.
- larkinrichards 7y agoThat seems like a serious diagnosis for anyone to make based off of news coverage alone. I don’t think we are helping the dialog when we propagate such ideas.
- nihonde 7y agoI also don’t mean to judge, but (right or wrong) marijuana use in Japan is still absolutely scandalous and seen as a major transgression that ends careers. That might explain why someone misjudged the appetite for this “scandal”.
- serguzest 7y agoI am randomly bombarded by negative things regarding WeWork on the internet lately. Some posts linked to negative news coverages about WeWork appeared on my facebook feed (business insider articles) I saw somewhere else that how some WeWork division manager wanted employees fired because she didn't like their energy. I have no opinion about the company neither I want to but I definitely feel pushed to have a negative opinion about them!
- domnomnom 7y agoYeah when the CEO is basically profiting off borderline fraudulent name licensing and leasing agreements there tends to be some moral outrage
- LatteLazy 7y agoNo one discusses it, but I thought a bit reason WeWork got this far is that when they started, the financial crash meant commercial leases were very cheap. Since they lock those in for 10+ years, but then their contracts with the clients are 1m month plus, they have seen revenue rise with the economy but costs stay roughly the same. Its sort of the opposite of the problem banks have where they borrow short term and lend long term.
- WesleyThom 7y agoI've seen on crunchbase and this app blind that there could be many layoffs. As many as 5000. Whats going on? Are the extreme cost cuts true?