WeWork co-founder Adam Neumann stepped down as CEO of an enclosed office space business, the company announced on Tuesday, a stunning fall for an entrepreneur watching the meteoric rise of one of its most valuable startup companies emerge in the last decade.
Under pressure to leave board members and investors in recent days, Mr. Neumann will become the non-executive chairman of WeWork's parent company, We. WeWork has named two current executives, Sebastian Gunningam and Artie Minson, as co-chairs.
Resignation is the most important step a company takes to win Wall Street after an initial public offering and signals that power can swing. far from the founders of fast growing businesses to investors. The company delayed its share sale last week after earlier reducing its estimated market value to just $ 1
Investors expressed concern that Mr. Neumann, a charismatic but unpredictable leader, exercised too much control over the company through special voting shares. Now he will lose much of his power over the company. Each of its shares will now have three votes, up from 20 votes earlier this year, according to two people informed of the change who were not authorized to announce it. According to one of these people, Mr. Neumann will not be able to control more than a minority of directors on the board and will have no control over any of the committees on board.
"While our business has never been stronger, in recent weeks control over me has become a significant distraction," Mr. Neumann said in a statement, "and I decided it was in my best interest of the company to step down as CEO. "
Eventually, the company will search for a new permanent CEO, according to two people who requested anonymity to discuss a sensitive topic.
The decision was made after a lengthy call on board on Tuesday and after discussions between Mr. Neumann and his closest confidants in recent days: On Sunday, he met with JPMorgan Chase Chairman and CEO, Jamie Dimon, and later that evening, had dinner with Bruce Dunley, a partner at Benchmark Capital and a director of We.
It is not clear whether Mr H's departure oyman as CEO will be enough to heighten interest in We shares. Investors have also raised concerns about the company's business model. We spend billions of dollars on expansion and are unlikely to make a profit in the foreseeable future.
According to one informed person, he could lay off up to 4,000 or 5,000 employees, and as of June 30, we have hired more than 12,500 employees, according to regulatory documents.
Mr. Neumann and WeWork have been the driving force behind the flexible office space business that is transforming the commercial real estate market. Individuals and companies are flocking to sites run by WeWork and others attracted by shorter leases and well-designed spaces.
But as the company grows at a slower pace, it loses billions of dollars and fails to convince investors that it can become a sustainable business. A more experienced CEO who runs the business with a steady hand can help defeat skeptics. In 2017, under pressure from investors, Travis Kalanik resigned as Uber's CEO. He was replaced by Dara Khosrowshahi, a former Expedia CEO who tried to improve the Uber culture and prepared the company for I.P.O.
Mr. Neumann's management style was sometimes impulsive: He once unilaterally stated that WeWork would ban meat from the company, forcing executives to quickly explain why.
He also invests in properties that we rent to WeWork. Although Mr Neumann later sold his shares in WeWork's investment property, the deals raised concerns among investors that he was trying to enrich himself at the company's expense.
Mr. Neumann's resignation comes as a blow to the biggest outside investor, SoftBank, a Japanese company that has invested billions of dollars in WeWork and other startup companies. Softbank's CEO, Masayoshi Son, gave its founders broad freedom to expand their business and looked at excesses otherwise until investors in the public markets pushed them away.