Barely a week ago,
was sitting atop the most valuable startup in the U.S. and getting ready for a blockbuster initial public offering.
Now he’s out of a job.
The charismatic, high-octane 40-year-old resigned under pressure as chief executive of WeWork’s parent Tuesday and will relinquish control of the shared-office company, a rapid fall from grace that is unusual in the startup world and bucks a trend of highflying founders with unchecked control.
Mr. Neumann and his advisers agreed following a tumultuous few weeks for the startup that the best path forward was for him to relinquish the CEO role, people familiar with the matter said. “Too much focus has been placed on me,” Mr. Neumann said in a staff email following the announcement Tuesday.
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Mr. Neumann will remain nonexecutive chairman and be succeeded by two of his deputies, who as co-CEOs are expected to cut staff and try to stem the company’s substantial losses.
finance chief of We Co., as the parent is known, will focus on finance, legal and human resources.
a veteran of
will tend to marketing and technology.
Mr. Neumann will also cede majority control of the company, with his supervoting shares reduced to 3-to-1 from 10-to-1, the people said.
Mr. Neumann’s wife, Rebekah, a co-founder who also held the title of chief brand and impact officer, is expected to step away from her roles at the company—including as CEO of its private elementary school, the type of unusual venture that defined Mr. Neumann’s desire to make We more than just an office-space company.
Mr. Neumann’s position became tenuous after We postponed a planned IPO earlier this month amid concerns from prospective investors about its governance and ballooning losses. The company, once valued privately at $47 billion, slashed its hopes for a public valuation to as low as $15 billion.
Further undercutting his position: eccentric behavior that was detailed in a Wall Street Journal article last week, such as a party-heavy lifestyle that included marijuana use in an airplane and unpredictable management decisions.
The end came swiftly for Mr. Neumann, who co-founded WeWork in 2010 and was the force behind its quirky vibe and vision.
As recently as last week it seemed unlikely that he would ever loosen his iron grip on the company. Key backers, including
Chase & Co. CEO
a venture capitalist who sits on We’s board, indicated that he had their support. In internal meetings and those with outside advisers, Mr. Neumann was still expressing confidence that the company could pull off the IPO later this year with him at the helm.
But things changed after the company chose to postpone the listing. What followed was a five-day stretch in which the backers whose money and loose reins had fueled Mr. Neumann’s rise turned against him, people familiar with the matter said.
A pivotal moment came when he lost the backing of
, which owns nearly a third of We and had been a major supporter of Mr. Neumann. The Japanese conglomerate by last week was holding internal discussions about how to remove him.
In addition to being We’s biggest shareholder, SoftBank has influence by virtue of its ability to keep pumping in the cash We needs. SoftBank had been expected to contribute as much as a third of the $3 billion We hoped to raise in the IPO.
Mr. Neumann huddled with close advisers over the weekend and into Tuesday in talks led by Mr. Dimon. Mr. Neumann had counted the bank chief as a confidant and taken to calling him his “personal banker” according to people familiar with their relationship.
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Mr. Dimon had his own reasons for being hands-on: JPMorgan is deeply entwined with We. Its investment funds were early backers; it had promised to lend the company and Mr. Neumann hundreds of millions of dollars; and it was the lead bank on the IPO. The full-court press on We, dating back years, was part of Mr. Dimon’s strategy to cozy up to promising startups that might pay JPMorgan to take them public and broker deals.
As of Friday and into the weekend, multiple members of We’s board, including Mr. Dunlevie, indicated that they planned to support Mr. Neumann as CEO. Mr. Dimon and JPMorgan’s money-management arm also told him they didn’t think he had to leave. By Sunday, Mr. Dunlevie, once a staunch ally, met with Mr. Neumann to tell him he would stand with SoftBank in pushing for the entrepreneur to leave.
Tuesday morning, Mr. Neumann convened with bankers and lawyers to finalize the details of his departure, one of the people said.
Mr. Neumann had long been betting that investors would focus on We’s rocket-ship growth and value it like a technology company.
Instead, analysts, prospective investors and media commentators harped on the company’s losses, $1.6 billion last year. They were growing as fast as revenue, suggesting the company wasn’t getting the benefits of scale that startups rely on to turn profitable.
With its core business of leasing office space tricked out in millennial-friendly décor, many would-be investors saw the company not as a tech darling, but as an overvalued real-estate company with potential conflicts of interest. Evidence of success in prior efforts to expand into new areas—dormlike apartments, fitness, retail—was scant.
Investors approached by We’s bankers at JPMorgan and
Goldman Sachs Group
balked at the price. We slashed its expected valuation by roughly two thirds, erasing $30 billion or more.
The fate of the IPO now remains to be seen, but people familiar with the matter said it is unlikely to take place this year as planned.
We is in talks with JPMorgan and Goldman about a new $3 billion loan, which would likely require the startup to raise several hundred million dollars of new equity. SoftBank is expected to chip in for more equity, and big real-estate firms may, too, one of the people said. Together with the cost cuts, that could give We enough cash to keep operating through the end of next year.
The company is considering shedding extraneous businesses and cutting costs, in part by axing a few thousand of its more than 12,000 employees, another person said.
In an email to staff, the two incoming CEOs suggested cutbacks could be coming for the company. “We will closely review all aspects of our company with the intention of strengthening our core business,” they wrote, saying they anticipated “difficult decisions ahead.”
The tumult atop We represents the latest threat to the widespread practice among Silicon Valley startups of giving nearly unchecked control to founders. Venture capitalists who once kept founders on a short leash now frequently hand over control to founders under the belief that they should be able to make big, long-term decisions without interference.
Taken with a similar ouster of the CEO of
in 2017, now two of the most valuable U.S. startups have dethroned founders over concerns about their leadership styles.
Mr. Neumann will remain a wealthy man. Entities he controls own roughly 30% of the company’s shares—it’s unclear how much of this is his and how much belongs to the other founder and early investors—and he has already taken out hundreds of millions of dollars from the company in stock sales, people familiar with the matter have said.
He also has borrowed $380 million tied to his shares in the company, according to securities filings, one of the issues prospective investors objected to.
Some of his wealth has gone into real estate. He has at least five homes on both coasts, including a $21 million home near San Francisco with a room shaped like a guitar. And Mr. Neumann has a collection of commercial properties in San Jose, Calif., that he has been expecting to turn into a downtown campus of We buildings, according to people briefed on the plans.
and Julie Steinberg contributed to this article.
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