According to a new WSJ report, certain members of WeWorks seven-person board, which includes cofounder and CEO Adam Neumann, are planning to pressure Neumann to step down and instead become Wes non-executive chairman.
The move, says the outlet, would allow him to stay stay at the company he built into one of the countrys most valuable startups, but inject fresh leadership to pursue an IPO that would bring We the cash it needs to keep up its torrid growth.The WSJ and Bloomberg are reporting that it is SoftBank specifically that wants Neumann to step down.
Neither WeWork nor SoftBank is commenting publicly.Its a fascinating development, the kind we saw when Ubers board successfully forced cofounder and longtime CEO Travis Kalanick to abandon his role as CEO.
Still, wed caution against drawing too close a comparison.
While the venture firm Benchmark, which spearheaded Kalanicks ouster, stood to lose billions of dollars if Kalanick dragged down Uber and continued to push off an IPO, Benchmark was not in a do-or-die situation because of its Uber investment.SoftBank appears to be in more dire straights, making this standoff a particularly meaningful one.Lets back up a minute first, though, and consider who is involved and which way this could potentially go.
A few days ago, Business Insider put together a useful cheat sheet about WeWorks board members that may hint at their allegiance.1.) Ronald Fisher who is vice chairman at SoftBank Group after founding SoftBank Capital, a United States venture arm of SoftBank joined SoftBanks board last year.
He oversees 114 class A shares, each of which carries one vote.
Obviously, hes going to side with SoftBank.2.) Lewis Frankfort the chairman of a fitness studio chain called Flywheel Sports has been a board member of WeWork for roughly five years, and BI says WeWork once loaned him $6.3 million, which he repaid with interest earlier this year.
We have to think hed stick with Neumann out of loyalty.
At the same time, he doesnt wield much power unless he has the right to block significant actions at the company (some shareholders get these blocking rights; some dont.) What he know: he controls 2 million shares, and 750,000 of them are Class B shares that carry 10 votes each.3.) Benchmark, which first backed WeWork in 2012, is represented on the board by Bruce Dunlevie, the founding partner of the venture firm.
Benchmark owns 32.6 million Class A shares, and could go either way, seemingly.
On the one hand, Benchmark doesnt want to establish a reputation for pushing out founders after the Kalanick debacle, and if it supports SoftBank over Neumann, it risks this exact thing happening.
On the other hand, Benchmark might not want to battle with SoftBank if it thinks it has staying power or its concerned (suddenly) that it allowed Neumann to amass too much control.4.) Steven Langman, the cofounder of private equity firm Rhne Group, has ties that go back a ways with Neumann, and he has benefited richly from the association.
According to an April story in the WSJ, Langman met Neumann through a shared rabbi in its earlier days and joined the board in 2012.
He also invested in the company (he owns 2.28 million shares, according to a bond filing).
Langman is on both the companys compensation committee and its succession committee.
He also runs a real-estate investment vehicle in partnership with We that buys and develops buildings to then lease back to the co-working company, despite that it raises conflict-of-interest questions.
Wed guess hes on Team Neumann.5.) Mark Schwartz is a former Goldman Sachs exec who stepped off the board of SoftBank earlier this year but who remains on WeWorks board.
Why he left SoftBanks board may or may not hold clues here.
According to The Information, he remains a confidante of SoftBank CEO Masayoshi Son.6.) John Zhao is the chairman and CEO of Hony Capital, which partnered with SoftBank and WeWork to create a standalone entity called WeWork China back in 2017, and Hony has subsequently poured more capital into that subsidiary.
Were not sure how close Zhao is to SoftBank, but if SoftBank brought Hony into WeWork, were guessing he will back the Japanese conglomerate on this one.
Hony doesnt own 5 percent or more of WeWorks parent company so its share holdings arent listed publicly.Harvard Business School professor Frances Frei also brought in roughly a minute ago to add a much-need sprinkling of gender diversity to WeWorks all-male board.
Freis name first came to be more broadly recognized when she was hired to help address Ubers battered culture, so presumably she has ties to Benchmark.
Wed guess shell side with Dunlevie, meaning that we have no idea whose side she will take.Neumann, its very worth noting, is himself is far more powerful than any of these six individuals.
Even after the company recently revised Neumanns supervoting rights, which gave him 20 times the voting power of ordinary shareholders and now give him 10, he could fire the entire board if he so chooses, notes the WSJ.Naturally, that wouldnt be a good look for Neumann, who is already battling growing public perception that, among other negatives for a public company CEO, he smokes a whole lot of pot and that he may be delusional.
(A WSJ piece last week reported that Neumann likes to smoke marijuana with friends and while airborne.
It also said that Neumann has confided to different people his interest in becoming Israels prime minister and president of the world.)All that said, SoftBank is also fast-losing credibility.
While its CEO, Son, has been long revered as a visionary, a growing number of sources weve spoken to question the viability of his entire Vision Fund operation.
They see WeWorks ever-soaring valuation on the private market, from $20 billion to, more recently, $47 billion which was almost single-handedly SoftBanks doing as just one in a costly string of poor calls.Indeed, despite the roughly $10 billion that SoftBank has sunk into WeWork, the financial loss it would take if WeWork falls apart would pale in comparison to the reputational hit Son would suffer, and you can bet there will be ripple effects.Our suspicion: given the Vision Funds impact on the startup industry over the last few years, theres a lot more riding on what happens with WeWork than meets the eye.
Stay tuned.Correction: An earlier version of this story did not include WeWork board member Mark Schwartz.