WeWork's co-founder, Adam Neumann, stepped down as CEO of the embattled shared office space business, the company said Tuesday, a fantastic fall for the founder who monitored the meteoric rise of one of the most valuable start-ups in the last decade .
Under pressure to leave board members and investors in recent days, Neumann will not be the leader of WeWork's parents, We Company. WeWork appointed two current executives, Sebastian Gunningham and Artie Minson, as co-managers.
The dismissal is the most important step the company has taken to win over Wall Street following an initial public offering, signaling that power may swing away from the founders of fast-growing businesses toward investors. The company delayed stock sales last week after previously reducing its estimated market value to as little as $ 1[ads1]5 billion, from the $ 47 billion valuation it sold to private in January.
Investors have expressed concern that Neumann, a charismatic but unpredictable leader, exercised too much control over the company through special voting shares. He will now lose much of his power over the company. Each of his shares will now have three votes, down from 20 votes earlier this year, according to two people briefed on the change who was not authorized to publish it. Neumann will not be able to control more than a minority of board members, and he will have no control over any of the board's committees, according to one of these people.
"While our business has never been stronger, in recent weeks the control directed at me has become a significant distraction," Neumann said in a statement, "and I have decided that it is in the company's best interest to retire as CEO . "
The company will eventually search for a new permanent CEO, according to two people who requested anonymity to discuss a sensitive issue.
The decision was made on a long board call on Tuesday and following discussions between Mr. Neumann and his closest confidants in recent days. On Sunday, he met Jamie Dimon's chairman and CEO of JPMorgan Chase, and later in the day he had dinner with Bruce Dunlevie, a partner in Benchmark Capital and CEO of We Company.
It is not clear whether Neumann's departure as CEO will be enough to bolster interest in We & # 39; s shares. Investors have also expressed concern about the company's business model. We have spent billions of dollars on expanding and will hardly make a profit in the foreseeable future.
The company is now considering significantly slowing growth. It can lay off as many as 4,000 or 5,000 employees, according to a person briefed on the matter. We employed more than 12,500 employees as of June 30, according to authorities.
Mr. Neumann and WeWork have been the driving force in the flexible office space business, which is transforming the commercial real estate market. Individuals and companies flock to locations operated by WeWork and others, attracted by shorter leases and nicely designed rooms.
But as the company has expanded at a rapid rate, it has lost billions of dollars and failed to convince investors that it could become a sustainable business. A more experienced top manager who has run businesses with a steady hand can help win skeptics. In 2017, under pressure from investors, Travis Kalanick resigned as CEO of Uber. He was replaced by Dara Khosrowshahi, a former CEO of Expedia who started trying to improve the culture of Uber and prepare the company for an I.P.O.
Mr. Neumann's leadership style was sometimes impulsive: He once unilaterally stated that WeWork would ban meat from the company, forcing executives to quickly come up with a reason for why.
He also invested in properties that leased space to WeWork. Although Neumann later sold the shares in the properties to an investment arm of WeWork, the deal raised concerns among investors that he was trying to enrich himself at the company's expense.
Mr. Neumann's resignation comes as a blow to the biggest outside investor, SoftBank, the Japanese company that has plowed billions of dollars into WeWork and other start-ups. Softbank's CEO, Masayoshi Son, has given the founders a wide scope in expanding their business and seen the other way back to the distress of investors in the public markets pushing back.