Two years after a failed initial public offering and the ouster of its hard-partying CEO Adam Neumann following revelations of shaky finances and questionable business practices, the coworking firm WeWork is now a publicly traded company on the New York Stock Exchange.
It closed up 14 percent on its first day of trading on Oct. 21.
The company, which Neumann cofounded in 2010, merged with a special-purpose acquisition company, or SPAC, in order to enter the public markets. Valued at about $9 billion when the SPAC deal was announced in March, the figure was a deep decrease from a onetime valuation of $47 billion by SoftBank Group.
At the beginning of 2019, WeWork had 425 locations in 27 countries with 15,000 employees. Its IPO filing that year revealed $1.9 billion in losses the previous year. It also paid $5.9 million (subsequently walked back) to Neumann and his founding partner, Miguel McKelvey, for the commercial use of the word “We,” which they had registered as a trademark.
The filing also was widely mocked for the real-estate company’s use of spiritual language, vaunting “the energy of we,” “community” and its goal to “elevate the world’s consciousness.”
The hopes for a highly valued IPO were also not helped by a Wall Street Journal profile that depicted Neumann smoking pot on an international private-jet flight and leaving behind a cereal box stuffed with marijuana.
The IPO filing was soon withdrawn and Neumann was forced to resign.
‘The Cult of We’
WeWork is having something of a cultural moment, with a Hulu documentary about Neumann and WeWork, two podcast series and two books on the company — Reeves Wiedeman’s “Billion Dollar Loser: The Epic Rise and Spectacular Fall of Adam Neumann and WeWork,” published in October 2020, and Wall Street Journal reporters Eliot Brown and Maureen Farrell’s “The Cult of We: WeWork, Adam Neumann and the Great Startup Delusion,” published in July.
In addition, an upcoming Apple TV+ miniseries, “WeCrashed,” starring Jared Leto as Neumann and Ann Hathaway as his wife, is slated to run.
The recently published “The Cult of We” recounts the rise and fall of a company that rented coworking space but presented itself as a technology company with its “physical social network” and highly designed interior spaces. The company claimed that it stimulated connections between its’ “members,” as it called its renters.
In the book, Neumann is presented as a talented salesman, raising private funding of increasingly vertiginous amounts from venture capital funds, stodgy mutual funds, banks such as JPMorgan Chase and finally Masayoshi Son’s holding company Softbank, which valued the company at $47 million. That gave it a huge influx of cash and encouraged Neumann to ever-greater extravagance.
“In a fight, who wins?” Son asked Neumann, according to the book. “The smart guy or the crazy guy?”
In his wild ride, Neumann was able to charm and bamboozle some of the financial industry’s leading lights, as well as his own board, to enrich himself and feed his own ego, according to the book’s portrayal.
From baby clothes to master of the universe
A few years before WeWork’s founding, Neumann had been a middling baby-clothes salesman, the book recounts. Yet by 2019, he had seven homes and a staff that included a hairdresser and stylist. A surfing enthusiast, he couldn’t be bothered to paddle out to the waves but had hired hands tow him out on jet skis — a practice frowned upon by most surfers.
Over the years, WeWork’s disparate interests extended to WeGrow, an elementary school conceived by Neumann’s wife; WeLive, which were dorm-like apartment complexes; and a $13 million investment in a startup that created artificial waves. Neumann talked about getting into hotels, fitness and airlines — and even pitched Tesla’s Elon Musk about building a community on Mars, according to “The Cult of We.”
It all unraveled when, in the need for a new influx of cash, WeWork decided to hold an IPO. The company’s incoherent filing was the beginning of the end.
“In the case of WeWork, I made a mistake,” Son admitted in 2019 after the IPO debacle and SoftBank was forced to infuse WeWork with an addition $9.5 billion to keep it afloat.
Though Neumann had become one of the poster boys of bad behavior by startup darlings of the era, he was richly rewarded for walking away from the company with over $800 million in cash.
New CEO, new hopes for post-pandemic environment
After Neumann’s ouster, two WeWork insiders were appointed as co-CEOs, but that didn’t last long.
In February 2020, Sandeep Mathrani, a real-estate industry veteran, became CEO. He began paring back WeWork to its core business: subleasing office space.
In March of this year, he told CNBC’s “Squawk Box” that WeWork was seeing an increase in occupancy. As the health crisis improved but uncertainty remained, many companies sought out fully equipped office spaces with flexible leases, with some enterprises renting whole floors of WeWork space. And, as before the pandemic, WeWork provided office space to individuals — entrepreneurs or freelancers — who wanted to work outside their homes. Adding to that number now are newly liberated remote or hybrid workers.
“We’ve got 33 markets that are up double digits in the last 60 days all around the world, starting off in Asia and going all the way to America,” he said on the show.
“There’s going to be a huge shift in coming back to work and we’re a flex provider, so we’re completely the person who would see it first because we’re plug-and-play,” Mathrani said. “We’re starting to see, even in New York now, new activity, so we’re pretty optimistic.”
Last week, as the company went public, Mathrani told “Squawk Box,” “What we did through the pandemic was to correct the cost structure, right-size the company, cut about $1.9 billion of costs.”
On the same program, Marcelo Claure, WeWork’s executive chairman and CEO of Softbank Group International, pitched the WeWork story as a successful turnaround, even though Softbank, by his estimate, was in the hole for about $10 billion.
“The important thing is [it’s] fair to say that two years ago, the value of WeWork was zero,” he said. “The company was on the verge of bankruptcy, the company had run out of cash and the fact that we’ve taken it from zero to an evaluation circa $8, $9 billion in two years is great.”
Asked about Neumann on the show, Claure said he was now “just another investor.”
Neumann is an investor whose stock in WeWork (which he is prohibited from selling until next July) is worth almost $690 million based on the closing price on Oct. 21, plus options worth more than $230 million, according to The New York Times. Combined with his $800 million golden parachute, the newspaper pointed out that he may one day receive more than $1 billion from WeWork.
Neumann and cofounder McKelvey at 9 a.m. on Oct. 21 hosted a party for more than 100 early WeWork employees to celebrate the company’s entry into the public markets. Champagne and cocktails flowed at the Standard Hotel in New York’s Meatpacking District, according to the New York Post. Neumann kept to water and iced coffee.
“I’m feeling amazing,” he told the newspaper.