Sep 25, 2019 - Economy

WeWork picks up the pieces after ousting its CEO

illustration of a wework coffee mug that is cracked

Illustration: Sarah Grillo/Axios

When someone makes the inevitable WeWork movie, consider it a remake of the end of Quentin Tarantino's 1992 film Reservoir Dogs. Almost all of the major characters die. The exception is Mr. Pink, who seems to escape, but then we hear police sirens and his fate is left ambiguous.

Driving the news: Founder and CEO Adam Neumann was fired on Tuesday in a boardroom coup that he enabled by recently changing governance terms.

State of play: He remains non-executive chairman, but is no longer an employee and didn't attend a company all-hands meeting yesterday.

Adam's wife Rebekah, who had been WeWork's chief brand officer and head of its WeGrow education unit, is also out.

Then there are WeWork's investors, who have seen the value of their shares plummet over the past month. Even if lead backers SoftBank and Benchmark believed Neumann was a cancer that needed to be removed, their surgery was stunningly sloppy, thus exacerbating the damage and hurting their own reputations in the process.

  • And, for SoftBank, there will be even more scrutiny on its strategy of pushing growth at all costs — with Neumann, that was like sending a kid into a doughnut store with a credit card.

J.P. Morgan may still have WeWork as a client, but its reputation took a major hit. The bank played multiple sides here — IPO underwriter, lender to the company, lender to Neumann, investor, debt syndicate arranger — and kept trying to sell Neumann to prospective investors until the bitter end. It has a lot riding on Wednesday's Peloton IPO.

WeWork employees are apoplectic. Not because Neumann has a vocal booster club like Travis Kalanick after his ouster, but because they had been told to expect a liquidity event. Even if they blame Neumann, it doesn't change the lack of change in their bank accounts. Particularly for those who might have expiring options.

Wework itself is Mr. Pink, the one who maybe survives.

  • The company promoted president/COO Artie Minson and vice chairman Sebastian Gunningham to co-CEO roles. There are no current plans to launch an outside CEO search.
  • Minson is a "make the trains run on time" sort of guy, coming from another company (Time Warner Cable) that required lots of upfront infrastructure spend and long-tail payback.
  • Gunningham is the "high growth" guy, having previously spent a decade at Amazon (most recently leading its marketplace unit).
  • Yesterday they told employees that very difficult decisions will need to be made (i.e., layoffs and unit closures) and acknowledged that WeWork will require some sort of capital infusion (it has $2b of cash on hand and is owed another $1.5b next year from SoftBank).
  • An IPO remains possible, but highly unlikely. As an inside source said to me Wednesday: "The markets might just need a break from WeWork for a while."

The bottom line: Almost everyone lost here. But WeWork isn't vaporware. It has a real product with lots of customers and revenue. A sequel remains possible.

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