What a couple of weeks it’s been for office space provider WeWork and its eccentric ex-CEO Adam Neumann. Gone are the days of a $47bn valuation and being on the edge of IPO, and in are a string of revelations about odd personal behaviour, major questions about the company’s business competence, and an ousting from the very organisation he founded.
The story in brief: as WeWork was about to go public, it released a whole host of documentation, revealing that Neumann was renting his own buildings to WeCompany, that he secured loans from WeCompany, and that he earned $6m in naming rights when WeWork changed its name to WeCompany.
Alarm bells were already ringing when it emerged that Neumann had cashed out “at least $700m via sales” before the initial public offering — which the Wall Street Journal said was “an unusually large sum” as founders “typically wait for the IPO to monetize their holdings.” Similarly, just before the fateful IPO attempt, We Company set up a new corporate structure that would have allowed Neumann to shift the tax burden on future profits to shareholders.
And he’s been slammed. Everywhere. “The commercial real-estate giant’s fundamental problem is not that it had an entitled, hard-partying, apparently self-dealing egomaniac as its head,” comments Business Insider.
“Its core trouble is that it has a business model that just doesn’t work.”
And this: “WeWork is a cautionary tale of what happens when greedy early investors purposely close their eyes to the erratic behaviour and questionable business practices of a charismatic founder,” says the usually restrained Forbes.
“This is a story of greed, arrogance and the unequivocal dismissal of the average investor and employees.”
WeWork’s valuation collapsed by $30bn, and earlier this week, Neumann resigned.
But hey — Forbes adds his net worth is still sat at $2.2bn, and he’s still with The We Company as a non-Executive Director.
Here are some more juicy tidbits about Adam Neumann.
1. Adam Neumann’s Business Has Never Been Profitable
For years, WeWork has been characterised by astronomical growth. Billions of dollars have rolled in and WeWork has kept on expanding, reaching 86 cities in 32 different countries.
Yet the company has…never been profitable. For every $1 spent, it has lost $1. Despite the astronomical prices to rent what is effectively just a desk in a room — as much as £600 a month ($734) in central London — the company loses $219,000 every hour.
The average WeWork customer is still only committed to being in their space for 15 months, while the average building lease is 15 years. This conundrum — and the huge disparity in financial commitments for leases and predicted income — leads Business Insider to report that WeWork could be out of cash by May 2020.
But this never seemed to concern Neumann. The BBC reports that the business leader once said that he believed WeWork’s valuation and size were based more “on our energy and spirituality than it is on a multiple of revenue.”
2. He Wants to Live Forever and Be ‘President of the World’
People with lots of money tend to want to maximise their opportunities to keep making money. So the 40-year-old’s repeated desire to ‘live forever’ is understandable. True to his word, he’s done an Elon Musk and invested in a life extension startup.
Verge adds that he’s also talked about becoming “President of the World”. Not bad for a man that dropped out of college just before graduation in 2002 — finally getting his degree 15 years later.
3. Forget Beers at Lunch! How About Tequila All Day?
According to Buzzfeed, tequila was a constant presence in job interviews and company events. WeWork offices even keep a bottle of his favourite tequila, Don Julio 1942, stocked just in case Neumann ever showed up.
Neumann, according to Verge, once fired 7% of his staff. At the end of the meeting, when the cuts were announced, he had employees carry trays of — you guessed it — tequila into the room. Darryl McDaniels of Run-DMC reportedly then came in and performed, with workers dancing to the song ‘It’s Tricky.’
4. He Banned Meat From WeWork…But Continued to Eat It
Similarly, Buzzfeed reports that WeWork banned red meat, poultry and pork from WeWork offices in 2018 to “leave a better world for future generations.”
Staff were reportedly shocked and confused by the decision — particularly as they saw him eating meat on multiple occasions.
5. Neumann’s Wife Was Equally as Flippant
Part of the aura surrounding Neumann came from those close to him: his sister was former Miss Teen Israel; and his wife, Rebekah Paltrow Neumann, is actress Gwyneth’s cousin.
Until Neumann’s fall, Rebekah was every bit as plugged into the business — with the power to unilaterally name Neumann’s successor as CEO, should he die. She also reportedly had the ability to have multiple employees fired after meeting them for a few minutes because she “didn’t like their energy.”
6. Legal Action Followed the Neumanns Home
Renovation work on his $10.5m Manhattan townhome led to disputes with contractors over $1m in alleged unpaid bills, according to Business Insider.
Four contractors filed legal claims over alleged unpaid bills, and one even sued the couple – while Neumann was cashing in on his WeWork stake to the tune of $700m.
Oh — and one of Neumann’s houses, worth $21m, has a room shaped like a guitar.
7. He Can’t Stop Making Rubbish Investments
In recent years, WeWork has stopped pretending to be an out-and-out coworking space. Secondary businesses opened workout studios and private elementary schools.
Neumann has taken this verve and applied it to investments in companies that have either not done so well, or have a lot to do with surfing.
Neumann spent $14m for a 42 percent stake in Wavegarden, a Spanish company that builds massive wave-generating installations.
In early 2019 WeWork invested $32m into a company called Laird Superfood. The natural food business sells products like turmeric coffee creamer, ‘performance mushrooms’, and instant ‘functional latte.’ The company was founded by — yes — a surfer.
Nuemann put $32m into a British energy startup called Faraday Grid to help the company expand globally. But Grid collapsed the same day that WeWork filed to go public.
And before WeWork, Neumann’s business ventures included women’s shoes with collapsible heels — and what Verge reports as “baby clothes with kneepads that had the truly chilling slogan, ‘just because they don’t tell you, doesn’t mean they don’t hurt.’”
Credit: The Business Journals
8. He Got Ditched in Israel for Stashing Weed on a Private Plane
Perhaps the most damning assessment of Neuman came via an astounding WSJ profile, which found that Neumann was forced to find his own way home from Israel after getting high on the plane journey and leaving cereal boxes stuffed full of weed for the return journey. Worried about being involved in international drug trafficking, the plane flew home, leaving Neumann in the country.
This was after reportedly flying senior WeWork employees out to a summer camp and musing on ways to solve the problem of orphans and eradicating world hunger.
But maybe the weed gig is no big deal. As Business Insider reports, Neumann has also invested in an Israeli medical marijuana company — whose chairman is former Israeli prime minister Ehud Barak.
9. His Fall has Serious Implications for Those Around Him
WeWork’s biggest investor is Softbank, whose owner, Masayoshi Son, made a reputation as the “Warren Buffet of Japan” after handing $20m to Jack Ma and seeing his stake rise to $50bn when Ma took Alibaba public in 2014.
Son has bet big on WeWork, and just 12 months ago raised his stake. In total, he has plunged $11bn into the company.
All of this — particularly Son’s connections to ousting Neumann, someone he reportedly told should be ‘more crazy’ — have called the investor’s judgement into doubt. Did he fundamentally misread the purpose of the business? Was he not paying attention to the way the business was working? Did he tolerate too much?
Similarly, New York Post notes that Neumann’s dramatic downfall has implications for JP Morgan CEO Jamie Dimon, who helped Neumann with almost $100m in loans via a personal line of credit — money that helped Neumann to buy buildings to leased back to WeWork, and later cash out a large chunk of his shares.
10. There could be more Adam Neumanns and WeWorks out there
In the wake of WeWork’s fall from grace, other office-sharing startups have been quick to distance themselves. They’re big, but not quite as big as WeWork — Knotel raised $400m in a recent funding round, which was less than a quarter of WeWork’s series G funding round.
But they’re largely operating in exactly the same way. They’re looking for asset-light management deals, which is what WeWork was doing. They work with short-term company leases and long-term building leases.
Some have managed to make the model work so far and turn a profit. But how long before they’re falling into exactly the same pitfalls?
Saad Sherida al-Kaabi
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