WeWork chief executive and company figurehead Adam Neumann has stepped down from the tech coworking giant due to a series of concerns around corporate governance, culture and financial losses.
Neumann said it was in the “best interests” of the company that he resign as chief executive, effective immediately, admitting that intense scrutiny over his role and influence at the company had been a “significant distraction”.
“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.
He will be staying on as a non-executive chairman of the global office rental firm, but will no longer have a majority vote.
The chief executive’s resignation comes after a series of controversies and embarrassing revelations for the tech giant, beginning with its attempts to complete a public offering.
The company’s IPO filing revealed huge financial losses and a number of strange deals with Neumann, including that he was renting his own buildings to WeWork, had secured loans from the company and had paid himself for the naming rights after changing its title to The We Company.
The filing also revealed that the company had lost nearly $US2 billion in the last financial year, despite being valued at $US47 billion by Japanese investment firm Softbank as part of a recent investment round.
WeWork’s expected valuation has since sunk to as low as $US10 billion.
There have also been concerns around Neumann’s apparently hard-partying attitude and the corporate culture he has brought to the company, with the Wall Street Journal reporting he had smoked weed aboard a private jet, brought in Darryl McDaniels of Run-DMC to perform for remaining employees after firing 7 percent of the workforce and flew employees to a summer camp where he discussed solving the problems of orphans and eradicating world hunger.
WeWork launched in 2010 from a single office in New York, and now has more than 500 locations in 29 countries, including Australia. The company rents offices to use as co-working spaces, but has the lofty stated mission to “elevate the world’s consciousness”.
As Arete Research’s Richard Kramer said, it is a “property company trying to sprinkle tech company fairy dust over itself”.
The IPO filing revealed that WeWork made $US1.8 billion in revenue in the last financial year but reported $US1.6 billion in losses. In the first half of 2019, the company spent every dollar that it made, and it is now reportedly considering firing as many as 5,000 employees.
The initial IPO filing that sparked the controversy also stated that Neumann was “critical” to WeWork’s operations, despite the chief executive now stepping down from the role.
“Adam has been key to setting our vision, strategic direction and execution priorities,” the IPO said.
“If Adam does not continue to serve as our chief executive officer, it could have a material adverse effect on our business.”
It now appears unlikely WeWork will be proceeding with IPO plans this year.