The workspace real estate company, which made its business hoarding pieces of urban workspaces before subdividing them into smaller work stations for startups and freelancers, had made a surprising splash in August when the company filed its IPO paperwork.
The company had hoped to make it to the markets by the end of last month, however, it’s becoming clearer that that’s no longer going to happen.
The Wall Street Journal reported that WeWork will delay its IPO until later this year due to investors questioning how much the company is actually worth. The report mentioned investors raised doubts about recent organizational decisions.
Understanding WeWork and what happens next remains unclear, but much of the company’s recent turmoil surrounds controversial co-founder and CEO Adam Neumann.
How WeWork got its start
WeWork got its start about a decade ago when Neumann and his future wife, Rebekah Neumann, founded the company with life-long friend Miguel McKelvey in 2010. Neumann and McKelvey had first founded startup GreenSpace in 2008, which served as a preview of what WeWork would become.
Green Desk focused its model on sustainability in coworking spaces, using eco-friendly tools from recycled furniture to wind-power electricity. It quickly gained steamed and Neumann and McKelvey cashed in, using Green Desk’s foundation as the start of WeWork, which opened its first office in New York City in 2011.
Since then, WeWork focused on the community aspect of work culture. Targeting creative-types, WeWork created workspaces to fit a certain aesthetic like regionalized spaces inspired by Art Deco style in Paris to more trendy, coffee-house vibes in New York City. WeWork currently holds workspaces in over 528 locations in 111 cities across 29 countries, with more than 500,000 memberships, according to the company’s IPO filing.
‘If there is a culture, it is that of a revolving door’
WeWork’s community aspect has come under scrutiny in the past. For workers, allegations over a chaotic workplace environment include unfair pay and organizational mischaracterization have led to lawsuits in the past, according to a story published by Bloomberg in 2017.
WeWork’s workplace has been described as a “frat-boy culture,” according to one lawsuit filed by a former employee, who claimed she was sexually assaulted twice during mandatory company events. Former WeWork senior vice president and head of compensation Lisa Bridges filed a complaint earlier this year claiming the company has a gender and pay gap that favors men over women. Others have claimed that the company discriminates against age.
In a lengthy profile about the ways of WeWork, New York Magazine’s Intelligencer detailed what current and former WeWork employees and executives workplace culture, which strays away from its community aspect by making workers work up to 70-hour workweeks, according to the bombshell report:
Building community is what WeWork has always promised, and its pitch to large corporations is not just hip design and flexible leasing terms but what WeWork calls its “WeOS,” referring to its expertise in helping companies optimize both space and overall culture. (In 2017, McKelvey was named WeWork’s chief culture officer, and he’s fond of using one of WeWork’s many internal slogans: “Operationalize Love.”)
But in dozens of interviews, current and former WeWork employees and executives questioned whether the company’s culture is itself one worth spreading. Despite the company’s slogan “Make a Life, Not Just a Living,” employees at all levels have often reported working 60- or 70-hour weeks, and events like Thank God It’s Monday and Summer Camp were mandatory. At its annual summit, the company keeps track of employee attendance at panels and events by scanning wristbands given to each person; excessive absences are reported to managers. A number of employees describe a regular cycle at WeWork: New people would arrive, excited by the company’s mission, only to get burned out, leave, and replaced by a fresh crop. Multiple executives told me Neumann’s cheerleading was critical to the company’s success. “From a business perspective, the cult is working,” said one executive.
WeWork also has a penchant for layoffs. In March, WeWork cut 300 employees — roughly 3% of its workforce — ahead of a hiring spree, according to Bloomberg.
In a report profiling Neumnann’s management style, The Wall Street Journal reported Neumann had fired 7% of his staff in 2016 before calling a company-wide meeting where he had employees serve trays of tequila shots before Run-DMC performed “It’s Tricky” in front of everyone, leaving some “stunned and confused.”
Neumann, 40, had also told staffers to lay off 20% of workers each year in a way to weed-out employees labeled as ” ‘B’ players.” The workplace firings aren’t just solely Neumann. His wife, Rebekah, a cousin of Gwyneth Paltrow, also gets in on the firing action. She apparently ordered employees to be fired after just meeting them because she didn’t like their “energy,” The Wall Street Journal reported.
The hurdles and doubt of WeWork’s IPO
As WeWork, also known as We Company, delayed its IPO since filing to go public in August after speculation from investors, the company cut its valuation drastically to below $20 billion — well south of what it valued itself as ($47 billion) in January. Reuters reported WeWork was now seeking a valuation of between $10 billion and $12 billion.
WeWork said it had lost $1.6 billion in 2018 despite taking $1.8 billion in revenue in its filing. The company reported losing nearly $900 million in the first half of 2019 alone. Those losses, along with questionable decisions away from work, have forced Neumann’s hand with board members of WeWork, who are calling for a reorganizational shuffle, which would remove Neumann as the company’s CEO.
WeWork’s biggest investor, Tokyo-based SoftBank, has pumped billions of dollars into the company and the company’s CEO Masayoshi Son, perhaps WeWork’s biggest cheerleader, wants Neumann out, according to CNBC.
Son reportedly found Neumann too stubborn for his liking. He grew frustrated with Neumann’s sure-headedness and ignoring advice passed down to him, according to the report. A report in The Wall Street Journal detailing Neumann’s marijuana use, which included taking weed aboard an international flight to Israel, also influenced Son to force Neumann’s hand.
The Wall Street Journal reported WeWork’s board is expected to meet soon to discuss Neumann’s future, which would allow him to stay at the company but in a different capacity. Neumann is apparently listening, as he started to talk to board directors and investors as of Monday to discuss his role at the company, according to Reuters, citing sources.
However, it remains unclear whether Neumann will agree to step away from the CEO role, or what his exact role — and fate for WeWork — will be.
(Update: Neumann is set to resign amid pressure from board members and investors, according to the New York Times.)