WeWork announced this week its co-founder and CEO Adam Neumann will step down from his position amid recent pressure from board members and investors, according to The New York Times and multiple news outlets. Neumann will serve as non-executive chairman of the We Company, WeWork’s parent organization. Current WeWork executives, Sebastian Gunningham and Artie Minson will assume the role of co-CEO’s.
Neumann’s resignation is part of the co-working space provider’s effort to win back Wall Street after the company’s initial public offering (IPO) recently fell apart. WeWork postponed the IPO after the estimated market value fell from a January $47 billion valuation to as little as $15 billion last week.
Investors’ enthusiasm for WeWork waned because of concerns that Neumann had too much control of the company through special voting shares, according to The New York Times. By resigning, he will lose a lot of that power, as each of his shares will now have three votes rather than 20, according to those familiar with the situation. New York Times’ sources also said Neumann will only control a minority of the board’s directors and he won’t have control of any of the board’s committees.
“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction,” Neumann said in a statement. “I have decided that it is in the best interest of the company to step down as chief executive. As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade. Our global platform now spans 111 cities in 29 countries, serving more than 527,000 members each day. Thank you to my colleagues, our members, our landlord partners, and our investors for continuing to believe in this great business.”
According to The New York Times, Neumann’s decision followed a long board call on September 24 and recent conversations between the now former chief executive and his closest confidents. Neumann had also met with JPMorgan Chase Chairman and Chief Executive Jamie Dimon and Benchmark Capital partner and We Company director Bruce Dunlevie.
Neumman’s departure as head of the company might not be enough to convince investors to grab We Company shares, however. There’s still concerns about the co-working space company’s business model—the We Company has spend billions of dollars during its expansion and is not expected to turn a profit any time soon. According to those familiar with the matter, WeWork is considering slowing down its expansion and could lay off 4,000 to 5,000 employees. The company employed more than 12,500 people as of June 30, per its regulatory findings.
While WeWork was at the forefront of the flexible office space industry, its rapid expansion cost the company billions in the process and made investors question whether it could be a sustainable business. The question now is if a more experienced CEO with a successful record can convince skeptical investors to come back.
“We would like to thank Adam for his vision and his passion in building WeWork over the past nine years,” incoming co-CEO’s Minson and Gunningham said in a statement. “Our innovative membership model, beautiful designs and inventive community offerings have changed the way individuals and enterprises around the world think about their workspaces. It is an incredible honor to lead WeWork during this important moment in the company’s history. Our core business is strong and we will be taking clear actions to balance WeWork’s high growth, profitability and unique member experience while also evaluating the optimal timing for an IPO. We are committed to the continued success of our members, partners, employees and shareholders on this new journey.”