According to a new WSJ report, certain members of WeWork's seven-person board, which includes co-founder and CEO Adam Neumann, plan to pressure Neumann to resign and instead become We Non-Executive Chairman. The move, says the outlet, "would allow him to stay in the company he built into one of the nation's most valuable startups, but create new leadership to invest in an IPO that will give us the money we need to sustain the tremendous growth . "
WSJ and Bloomberg report that it is SoftBank who specifically wants Neumann to step down. Neither WeWork nor SoftBank comment publicly.
It is a fascinating development, the kind we saw when Uber's board successfully forced employees and long-time CEO Travis Kalanick to leave their role as CEO, yet we are cautious about drawing too close a comparison. if Kalanick pulled down Uber and continued to push off an IPO, Benchmark wasn't in a do-or-die situation because of Uber investment
SoftBank appears to be in more bleak frames, making this resistance a particularly meaningful one.
However, let's back up for a minute first and consider who is involved and which way this could potentially go. A few days ago, Business Insider put together a useful cheat sheet about WeWork's board members who can hint about their allegiance.
2.) Lewis Frankfort – chairman of a gym chain called Flywheel Sports – has been a board member of WeWork for about five years, and BI says WeWork once loaned him $ 6.3 million, which he repaid in interest earlier this year . We must believe that he will stick to Neumann with loyalty. At the same time he does not have much power unless he has the right to block significant actions in the company (some shareholders get these blocking rights; some do not.) What he knows: he controls 2 million shares and 750,000 of them are Class B shares which has 10 votes each.
3.) Benchmark, which first supported WeWork in 2012, is represented on the board by Bruce Dunlevie, founder of the venture firm. Benchmark owns 32.6 million Series A shares, and could go either way, apparently. On the one hand, Benchmark does not want to get a reputation for pushing the entrepreneurs out after the Kalanick debate, and if it supports SoftBank over Neumann, it risks that exactly this thing will happen. On the other hand, Benchmark might not fight SoftBank if it thinks it has staying power or is (suddenly) worried that it allowed Neumann to gather too much control.
4.) Harvard Business School professor Frances Frei was brought in about a minute ago to add a much-needed sprinkling of gender diversity to WeWork's all-male board. Frei's name was first recognized more widely when she was hired to help address Uber's battered culture, so she probably has ties to Benchmark. We assume she will take a page with Dunlevie, which means we have no idea which side she will take.
5.) Steven Langman, founder of the private limited company Rhône Group, has ties with Neumann, and apparently he has benefited well from the association. According to an April story in the WSJ, Langman met Neumann through a shared rabbi in his earlier days and joined the board in 2012. He also invested in the company (he owns 2.28 million shares in the company, according to a bond filing). Langman is a member of both the company's compensation committee and its success committee. He also operates a real estate investment vehicle in collaboration with Vi, which buys and develops buildings and then leases it back to the cooperating company, despite the issue of conflict of interest. We assume he is on Team Neumann.
6.) John Zhao is Chairman and CEO of Hony Capital, which partnered with SoftBank and WeWork to create a standalone entity called WeWork China back in 2017, and Hony has subsequently poured more capital into that subsidiary. We're not sure how close Zhao is to SoftBank, but if SoftBank brought Hony into WeWork, we bet he'll support the Japanese conglomerate on this. Hony does not own 5 percent or more of the WeWork parent company, so its shares are not listed.
Neumann, it is worth noting, is himself far stronger than any of these six people. Even after the company recently revised Neumann's prerogatives, which gave him 20 times the voting rights of ordinary shareholders and now gave him 10, he could fire the entire board if he so chooses, WSJ notes.
Of course, it would not be a good look for Neumann, who is already fighting for growing public perception that he, among other negatives for a CEO, is smoking a whole lot of pots and that he is delusional, after a WSJ piece who reported Neumann confided to various people his interest in the role of Israeli prime minister and, more recently, to become world president.
SoftBank is also losing credibility quickly. While CEO Masayoshi Son has long been respected as a visionary, a growing number of sources we've talked about are questioning the viability of the entire Vision Fund business, pointing to WeWork – whose valuation jumps in the private market, from Another $ 20 billion, recently, $ 47 billion, was entirely a product of SoftBank's doing – as just one in a costly string of bad calls.
Despite the roughly $ 10 billion that SoftBank has sunk into WeWork, the financial loss it would take if WeWork falling apart would pale in comparison to the reputation hit Son would suffer, and you can bet that it will be repercussions.
Put another way, given the Vision Fund's impact on the startup industry in recent years, it's a lot more like cycling on what happens to WeWork than meets the eye. Pay attention.