WeWork CEO Adam Neumann—who leased buildings he owned to his own company, who reportedly took a $7 million personal loan from the office-subleasing business, who cashed out at least $700 million in WeWork shares before the startup filed to go public, who raised funds in January at a valuation of $47 billion before the company reduced its estimated market value to as little as $10 billion to $12 billion beneath the glare of the IPO process, who once capped off a staff meeting about recent layoffs with tequila shots and a performance by a member of Run-DMC, and who personally trademarked the word we in order to extract millions from his company—is stepping down, the company announced on Tuesday. Neumann will stay on as the nonexecutive chairman of WeWork’s parent company, We Co.
“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,” Neumann said in a statement.
The decision was reportedly made after a lengthy call among board members on Tuesday and deliberations with Neumann. Two current WeWork executives, Sebastian Gunningham and Artie Minson, will serve as interim CEOs while the company conducts a search for a new head, according to a press release.
Neumann’s sidelining comes in the wake of WeWork’s troubling decision last week to delay its IPO at least until next month, despite having already filed paperwork with the Securities and Exchange Commission. Investors reportedly had major concerns about the company’s lack of a clear path to profitability, its plummeting valuation, and its leadership. WeWork aimed to raise at least $3 billion during the public offering, the amount necessary to qualify for a $6 billion credit line, but found that it would likely only be able to get a little more than $2 billion.
News of the delay intensified doubts about Neumann’s chaotic reign over WeWork. The Wall Street Journal reported on Sunday that a bloc of WeWork directors were lobbying to curtail his power. Some of these insurgent directors were reportedly connected to the company’s largest investor, SoftBank Group Corp., which provided $2 billion in funding to WeWork in January.
Neumann founded WeWork with his partner Miguel McKelvey in 2010. The company quickly became one of the decade’s most valuable startups, attracting buzz for its business model of outfitting office buildings with millennial-friendly interiors and leasing them short-term to smaller companies as trendy shared workspaces. Yet Neumann’s tenure has been embroiled in near-constant scandals over the past year. In January, the Journal reported that WeWork had been leasing multiple buildings that Neumann had invested in, which the company’s board had cited as a potential conflict of interest. A WeWork debt offering prospectus indicated that it had paid more than $12 million in rent to buildings “partially owned by officers” of the company between 2016 and 2017.
In July, the Journal reported that Neumann had cashed out more than $700 million of his shares before WeWork’s IPO, a highly unusual move for a startup founder. WeWork’s IPO filing in August revealed that the company had also been doling out multimillion-dollar loans to Neumann and other executives, and that it forgave a $600,000 loan to CFO and current interim co-CEO Artie Minson. The filing also disclosed that WeWork had paid Neumann nearly $6 million because he had trademarked the word we. Neumann returned the money in early September.
After WeWork postponed its IPO, the Journal published an alarming profile of Neumann and his conduct while leading the company. The piece indicated that Neumann had cultivated a culture of heavy day-drinking during the company’s early years, and it contained anecdotes about his marijuana use on international private flights that led some investors to propose an investigation into whether he had been using drugs during work hours. In one already-notorious incident, Neumann reportedly held an all-hands meeting in 2016 to address the recent firings of 7 percent of its staff. Immediately after somberly addressing the departures, he then had workers pass out trays of tequila shots and brought rapper Darryl McDaniels of Run-DMC into the room to perform “It’s Tricky.” The Journal also reported that his wife, WeWork chief brand officer Rebekah Neumann, had been firing employees after meeting them for mere minutes because she was put off by their “energy.”
Adam Neumann is stepping down at a moment of crisis for WeWork, which recently reported revenues of $1.5 billion and operating losses of $1.4 billion for the first half of 2019. The Information also reported on Tuesday that WeWork and bankers are discussing the possibility of laying off 5,000 employees, a third of its workforce, in order to save the cash-burning company.