WeWork May Be in Bankruptcy, But the Drama Never Ends
WeWork burst on the scene in the 2010s and made a big splash globally. It was flashy and innovative and shortly became a symbol of corporate and CEO overreach and excess. By 2019, it also became a symbol of CEO megalomania and an ineffective board of directors. That CEO, Adam Neumann was spectacularly overthrown, though he left the company with hundreds of millions.
WeWork is currently in bankruptcy. Adam Neumann is trying to buy it. Most people who followed WeWork’s fall – easy to do as it was the subject of blistering stories in Wired, a dozen other magazines and a Showtime limited series – blame Adam for it. And with good reason.
How WeWork Got to Where It Is
The story of WeWork has been told in a podcast (WeCrashed), a documentary (WeWork: Or The Making and Breaking of a $47 Billion Unicorn), and the Showtime series mentioned above (WeCrashed). It was reported that Showtime’s writers had a problem – they were afraid that if they left everything in no one would believe it. That is how insane the story of WeWork and Adam Neumann was – it was equally a business story and cult expose.
It might all be adequately summed up in one scene in the third episode: a prospective investor/hire asks Adam, "Don't you have to get the board of directors' permission before you sign me? " He answers, "I am my board."
He said that in front of his entire board of directors. No one said a word.
That, in a nutshell, perfectly sums up the early years of WeWork. The board of directors were also investors and major shareholders. They had a duty to reign in Adam's excesses and self-dealings but never tried to check him until the company was crashing.
Then, they paid him hundreds of millions to leave the company. Like everyone involved in WeWork, except Adam and his wife, they had mind-bending losses. They had themselves to blame, their inactions and lack of oversight led directly to their losses.
The Board Tried to Cash Out
And Left the 'Regular' Shareholders to Fend for Themselves.
As AV Club put it, "The board, the people whose responsibility it should have been to rein the company in, was more focused on getting a gigantic injection of cash that would have allowed its members to cash out their shares at a huge profit; when that failed, they pushed for an IPO to get themselves the same."
Needless to say, this was done at the expense of the company, employees, and minority shareholders.
WeWork did have its IPO after amazingly Machiavellian machinations between the investors, new money, and, of course, Adam. However, they left the minority shareholders - most, if not all of them, employees who exercised stock options just before being laid off - with nothing.
The lawsuits began. Breach of duty (s), self-dealing, shareholder oppression, and more. COVID swept in and put a major hit on WeWork’s business model and they started to miss rent and mortgage payments.
Now they’re in bankruptcy.
The Bankruptcy and the Once and Future CEO
The bankruptcy executors claim that they are close to finishing a restructuring and will be out of bankruptcy in a matter of weeks.
Neumann, however, with a new real estate company and some partners with deep pockets has come out of the shadows. He is currently claiming – loudly in the media – that he has a great plan to buy the company out of bankruptcy but “WeWork has been ignoring attempts to get more information so they can come up with a bid.”
As noted in the letter written by Neumann’s attorney, “WeWork doesn’t seem interested in entertaining Neumann’s potential offer . . . we write to express our dismay with WeWork’s lack of engagement even to provide information to my clients in what is intended to be a value-maximizing transaction for all stakeholders.”
About “maximizing for all shareholders” – in 2019, with the company valued at $47 billion Neumann wrecked the plans for an IPO, took an enormous payout and stepped down.
He had no concern for the shareholders then.
