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Home / Business / WeWork CEO Adam Neumann expected to step down

WeWork CEO Adam Neumann expected to step down



WeWork co-founder and CEO

Adam Neumann

is expected to resign after the company's long-awaited public offering was derailed, revealing a remarkably rapid fall from grace of the leader of one of the country's most valuable startups.

Mr. Neumann and the company's advisors have agreed that the best way forward for the start-up of office sharing is to give up on the CEO, said people familiar with the matter. He is expected to remain no leader of We Co., as the company is officially known.

An announcement about the move could come as soon as today, the people said, provided the decision is not reversed at the last minute.

Mr. Neumann's position in the company was tough after we delayed a stock exchange listing earlier this month, amid concerns from potential investors about management and the ability to turn large losses. That skepticism has led to significant pressure in the company's expected valuation, which has fallen from $ 47 billion earlier this year to as low as $ 1

5 billion.

Mr. Neumann will give majority control of We, with voting shares reduced to 3-to-1 from 10-to-1, the people said.

The company plans to name two internal managers as CEOs:

Artie Minson,

currently the company's chief financial officer, and

Sebastian Gunningham,

a veteran of

Amazon.com
Inc.,

a person familiar with the decision said.

Further emphasized his position: eccentric behavior detailed in a Wall Street Journal article last week, including a party-heavy lifestyle that included marijuana use in a plane and unpredictable management decisions.

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Mr. Neumann has been in meetings with

JPMorgan

Chase & Co. CEO

James Dimon

at the bank's headquarters this week and met separately with the WeWork director

Bruce Dunlevie

Sunday to discuss his fate, the people said.

JPMorgan is the Wall Street firm closest to We, as WeWork parents are officially known, and serves as an investor, lead author of the planned IPO and as a lender to the company and Mr. Neumann personally. Dunlevie is a general partner for the venture capital firm Benchmark, the second largest shareholder outside.

The situation is delicate because Neumann controls the nine-year-old company and its board, which he can briefly dismiss if he wishes.

But pressure on Neumann from

SoftBank Group
Corp

seems to have marked a major turning point. The Japanese technology conglomerate is among those pushing for its extinction, the magazine first reported Sunday. In addition to being Weâ & # x20AC; & # x2122; s largest shareholder, SoftBank has an influence through its willingness to pump much-needed cash to the company. SoftBank was expected to contribute as much as a third of its $ 3 billion revenue. Without support, there would have been few other places for We to look for the billions of dollars it needs to continue to grow at its current pace.

The change in the tune from SoftBank and others was also surprising because existing investors have long known about some of the concerns raised in recent weeks. Our board approved agreements between the company and Mr. Neumann as the leases with his properties, as well as other eyebrow-traveling big ticket items like the more than $ 60 million private jet used by Mr. Neumann, people familiar with the matter have said. His love for tequila and partying has long been well known.

It has been a quick event ability for Mr. Neumann and We, who just over a month ago was the country's most valuable startup with high hopes for a successful public offering. But just after the filing of the stock exchange listing was revealed in mid-August, criticism and concerns began to gather.

Potential investors appreciated the company's previous valuation of $ 47 billion as they focused on losses totaling more than $ 1.6 billion last year and a long list of unusual agreements between Mr. Neumann and the company. We reduced the estimated valuation by about two-thirds and deleted $ 30 billion or more.

The key to the valuation decline was a view of many potential investors that we were a rapidly growing office rental company with large losses, rather than the technology-like "physical social network" that Mr. Neumann had long considered. We rent out office space in the long term, renovate it to make it hip and welcoming, and rent it out in the short term.

The fate of the IPO remains to be seen. The company said when it was postponed that the offer would take place by year-end, but people familiar with the matter now say that with a new CEO coming in, a further delay may be necessary.

The We Co. & # 39; s rapid expansion and flexible business model has helped it stay out of the competition. But some investors say the public offering may not be worth the risk. Here's why. Photo: David & # 39; Dee & # 39; Delgado / Bloomberg

Write to Eliot Brown at eliot.brown@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com, David Benoit at david.benoit@wsj.com and Maureen Farrell at maureen.farrell@wsj. com

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