According to a new WSJ report, some members of WeWork's seven-member board, with co-founder and CEO Adam Neumann, plan to pressure Neumann to step down and become non-executive chairman of We instead Staying with the company that he has built into one of the most valuable startups in the country, but bringing in a new leadership to pursue an IPO that would bring us the money it needs to sustain its rapid growth. "
WSJ and Bloomberg report that it is specifically the SoftBank that is calling for Neumann's resignation. Neither WeWork nor SoftBank comment publicly.
It's a fascinating development, as we saw it, when Uber's board successfully co-founded Travis Kalanick, co-founder and longtime CEO, to give up his role as CEO. However, we warn against drawing a comparison too close. While the venture firm Benchmark, which led Kalanick's downfall, lost billions of dollars as Kalanick pushed Uber down and continued the IPO, Benchmark was not in a dying position because of its investment in Uber.
SoftBank seems to be in a more difficult situation, which makes this stalemate particularly meaningful.
However, let's take a short break first and decide who is involved and in what direction this could possibly go. A few days ago, Business Insider put together a useful cheat sheet about WeWork board members, possibly suggesting their loyalty. Among the six board members are Adam Neumann:
2.) Lewis Frankfort – the head of a gym chain called Flywheel Sports – was on the board of WeWork for about five fives, and BI said WeWork once lent him $ 6.3 million. what he repaid in interest this year. We have to believe that he would remain loyal to Neumann, but he does not have much power. He controls 2 million shares, 750,000 of which are Class B shares, each with 10 votes, but it is still a fraction of what SoftBank controls.
3.) Benchmark, which for the first time supported WeWork in 2012, is represented on the board by Bruce Dunlevie, the founding partner of the Venture company. Benchmark owns 32.6 million Class A shares and could apparently go both ways. On the one hand, Benchmark does not want to have the reputation of ousting founders, and if it supports SoftBank over Neumann, it risks just that. On the other hand, Benchmark may not want to fight Softbank if she thinks she is persistent.
4.) Professor Harvard Business School, Frances Frei, was called in about a minute ago to expand the gender diversity to WeWorks' purely male board. Frei's name was widely recognized for the first time when she was hired to deal with Uber's battered culture. So she probably has links to benchmarks. We assume that she is on the side of Dunlevie, which means that we have no idea which side she will face in this letter. Your shares are not relevant.
5.) Steven Langman, co-founder of the private equity firm Rhône Group, has ties that go back to Neumann, and he appears to have profited profusely from the club. According to an April story in the WSJ, Langman Neumann met in earlier days about a common rabbi and joined the board in 2012. He also invested in the company (he owns 2.28 million shares of the company, according to a bond). He is a member of the Compensation Committee and the successor committee of the company. And, in partnership with We, he runs a real estate investment vehicle that buys and develops buildings to lease to the co-operating company, even though this leads to conflicts of interest. We suspect that he belongs to the team Neumann.
6.) John Zhao is Chairman and CEO of Hony Capital, which has partnered with SoftBank and WeWork in 2017 to form a standalone entity called WeWork China. We're not sure how close Zhao is to SoftBank, but if SoftBank brings Hony to WeWork, it will support the Japanese conglomerate in this case. Hony does not own at least 5 percent of the parent company of WeWork, so its holdings are not listed on the stock exchange.
Neumann himself is far more powerful than any of these six persons. Even after a revision of Neumann's control rights, which gave him 20 times the voting rights of the common stockholders and now 10 times the voting rights, he could at his discretion dismiss the entire board, notes the WSJ.
That would of course not look good for Neumann, who is already fighting against the growing public perception that he smokes a lot of pot next to other negatives for a CEO of a public company and that he is delusional after reporting in a WSJ play Neumann has entrusted to various people his interest in Pott, the role of Israeli Prime Minister and, more recently, President of the World.
On the other hand, SoftBank also quickly loses credibility. While his CEO, Masayoshi Son, has long been revered as a visionary, we have approached a growing number of sources to challenge the profitability of his entire Vision Fund business, and refer to WeWork – whose valuation jumps in the private market 20 to last $ 47 billion – that's just one of many bad calls. In fact, despite the $ 10 billion SoftBank has invested in WeWork, the financial loss that WeWork would suffer from the breakup would fade in comparison to Son's reputation slump, and there will likely be ripple effects.
Considering the impact of the Vision Fund on the start-up industry in recent years, much more depends on what's happening to WeWork than you think. Stay tuned.