Sep 23, 2019

Latest WeWork drama: SoftBank vs. CEO Adam Neumann

Illustration: Aïda Amer/Axios

The WeWork soap opera had been scheduled to take a short hiatus, at least until Q3 numbers could be compiled, but then the company surprised everyone with a pop-up episode over the weekend.

What's happening: The WSJ reported yesterday that "a bloc of WeWork directors is planning to push Adam Neumann to step down as chief executive." CNBC added that SoftBank's Masayoshi Son supports the move.

What we’re hearing: The unofficial narrative is that the directors were shocked, just shocked to find out that Neumann likes to smoke pot and had some questionable self-dealing with the company. Too bad they didn't ask anyone who knows Neumann about the former or read their own financial disclosures about the latter.

  • Yes, the part about transporting marijuana over international borders was likely new, but hardly the sort of thing that would get most CEOs canned in 2019.

Between the lines: What the directors do seem to have learned recently is that public market investors are very hesitant to invest in a WeWork with Neumann at the helm, so they're putting up a smoke screen to deflect from their own blind spot.

  • Again, please don't peddle that the board is suddenly blanching at how Neumann spent company money. Save for fraud, of course, but there's not yet even a whisper of that.
  • There also are market concerns about losses, but that's one in which Neumann and SoftBank seemed to share the same "grow at all costs" philosophy. (Hey DoorDash, you watching this?)

Our thought bubble: We've previously pondered SoftBank's endgame, with the most plausible theory being that it would like to become WeWork's investor of last resort.

  • It is unclear if SoftBank really wants Neumann out or is just using the threat as leverage to postpone the IPO (thus buttressing internal rates of return for Vision Fund 1, as fundraising for Vision Fund 2 continues).
  • SoftBank runs the risk of scaring off future founders, but a bigger one of WeWork blowing up Vision Fund 2. Plus, it can just tell other entrepreneurs that they're smarter, more stable, etc., than a loose cannon like Neumann. Silicon Valley may run on hubris, but it's underwritten by flattery.

The big picture: Yes, there are lots of shades of Uber here, particularly once you notice that Benchmark is on the board. But it's unclear how Masa currently views the Travis-for-Dara swap, given Uber's lackluster public market performance.

  • As Axios colleague Felix Salmon said: When a company's CEO is also its mascot, it's hard to know what firing the CEO will do.

The bottom line: That's true for WeWork, SoftBank, Neumann, Wall Street and yours truly. All we know for sure is that we'll get more shocks and cliffhangers before a conclusion.

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