How Not to Build A Company

Consider this one of our corporate governance articles. Reading about WeWork one can’t help but wonder “Where were the adults in the room? Where was the Board?” Here is a partial list of WeWork’s gaffes.

  • WeWork founder and former CEO Adam Neumann and the Board creating and approving a business model predicated upon absorbing long-term leases and sub-letting short-term. Many of those short-term leases were extended to startups. How did WeWork expect to survive a recession?
  • WeWork founder and former CEO Adam Neumann selling more than $700 million of stock ahead of planned IPO (which thankfully is not happening).
  • Insiders completely selling out of their positions post IPO (see table below).
  • Creating a non-investor friendly voting structure that overwhelmingly favors Neumann.
  • WeWork founder and former CEO Adam Neumann owning buildings the company leased from (conflict of interest).
  • WeWork founder and former CEO Adam Neumann carrying marijuana on his transatlantic flight.
  • Fraudulently positioning WeWork as a “technology” company when Commercial Real Estate (“CRE”) is clearly the core business.
  • Incredulous claims of WeWork as a demand aggregator and value creator for technology companies (see graphic below).
  • Private investors (SoftBank included), putting money into WeWork at a $47 Billion valuation. This for a company that only generated revenue of approximately $1.8 Billion in the year 2018 and $1.5 Billion during the first six months of 2019.
  • Not having a logical mission statement, instead verbally spouting about some amorphous thing based on love, peace and co-working.
  • WeWork pulled its IPO on September 30th 2019. See our podcast below for our perspective on what will happen next with WeWork.

Where have all the holders gone?

Difficult to believe that WeWork provides meaningful lift.

Dreamer? Yes. Operator? No.

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