WeWork co-founder Adam Neumann agreed on Tuesday to resign as chief executive and give up majority voting control, after SoftBank Group and other shareholders turned on him over a plunge in the US office-sharing startup’s estimated valuation, Reuters reports.
The decision came after We Work parent We Company postponed its initial public offering last week following pushback from perspective stock market investors, not just over its widening losses but also over Neumann’s unusually firm grip on the company.
This was a blow for SoftBank, which was hoping for We Company’s IPO to bolster its fortunes as it seeks to woo investors for its second US$108 billion Vision Fund.
SoftBank invested in We Company at a US$47 billion valuation in January. But investor skepticism led to it earlier this month considering a potential IPO valuation of as low as US$10 billion.
We Company had vowed to press ahead with an IPO by the end of the year. But there was little sign that IPO investor sentiment would change, threatening the value of the stakes held not just by outside investors, but by Neumann as well.
The size of Neumann’s holding has not been disclosed.
What was the venture capital world’s biggest upset then morphed into one of corporate America’s most high-profile boardroom dramas. SoftBank managed to muster enough opposition to Neumann in a meeting of We Company’s seven-member board on Tuesday to convince him to step down.
Reuters had reported on Monday that Neumann had engaged in talks about changes to his role.
“In recent weeks, the scrutiny directed towards 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.
Artie Minson, currently chief financial officer of We Company, and Sebastian Gunningham, a vice chairman for the New York-based startup, will become co-chief executives, the company said. Neumann will stay on the board as non-executive chairman, the company added.
We Company is considering slowing its expansion so it burns through less cash and would require less funding in the absence of an IPO in the near team, Reuters reported on Monday.
“While we anticipate difficult decisions ahead, each decision will be made with rigorous analysis, always bearing in mind the company’s long-term interests and health,” Minson and Gunningham wrote in an internal company memo seen by the news agency.
Neumann also agreed to reduce the power of his voting shares, losing majority voting control, according to the sources. Each of his shares will now have the same voting rights as three We Company common shares, not the 10 common shares previously, the sources said.
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