Education & Job

Decoded: What went wrong with WeWork

By Ellen Huet and Gillian Tan

Adam Neumann spent some of his final days as WeWork’s chief executive officer the same way he had for countless weekends in recent years: surrounded by family at his house in the Hamptons. With the company’s plan to go public smoldering, his control over the business dwindling and its biggest investor starting to turn against him, Neumann gathered his wife and business partner, Rebekah, and their five kids, piled into a car and drove east to the tony beach community.

As the Neumanns unplugged at sundown last Friday to observe the weekly Jewish ritual of Shabbat, SoftBank Group Corp.’s Masayoshi Son was preparing for an ouster. Son’s businesses had more than $10 billion riding on the company in the form of stock and loans. Over the course of a month, financial advisers to WeWork determined that the shares were worth about a quarter of the price SoftBank paid in January. The problem, Son reasoned, was Neumann.

WeWork long had the image of a family business: a husband-and-wife pair at the helm and company slogans about how life is “better together.” Although Adam Neumann started the business in 2010 with Miguel McKelvey, a kindred spirit who, like Adam, spent time on a commune during childhood, they rewrote the founding story over the years to include Rebekah. The three were listed as founders in registration documents for an initial public offering published last month. Rebekah, 41, was also chief brand and impact officer of the parent company We Co., CEO of an education arm of the business called WeGrow and one of three people assigned to select a replacement for her 40-year-old husband if he dies.

There were a lot of things about WeWork that made public investors recoil. For every $1 of revenue, it incurred about $2 in expenses and didn’t make a convincing case it could reverse that equation. It sought to be valued as a technology business but operated much like a real estate company. Its corporate structure looked like a schematic for a microwave.

And the Neumanns seemed to embody it all with a sense of arrogance, as one financial analyst put it. The IPO prospectus offered a litany of apparent conflicts of interest. Adam Neumann hired multiple family members besides his wife, including her brother-in-law, who also left the company this week. Neumann borrowed company money, collected rent from WeWork on space in buildings he owned and charged the company $5.9 million for the rights to a trademark he held on the name “We.” He had effective control of management decisions through stock with special voting rights, though it ultimately wouldn’t be enough to keep him in power.

This account of Adam and Rebekah Neumann’s nine-year reign and swift fall is based on interviews with seven current and former WeWork employees, advisers and investors, and multiple other people familiar with the company. SoftBank declined to comment, as did representatives for Neumann and WeWork, citing regulatory restrictions around a pending IPO.


After an initial onslaught of investor criticism in recent weeks, WeWork took steps to address many of these issues and lessen Neumann’s grip on the company, but he still held onto his job. Son, a 62-year-old Japanese billionaire known for his own eccentricities and mystical pronouncements, had been a giddy supporter of Neumann for years. This appeared to be the case as recently as last week, when SoftBank was anticipating Neumann’s attendance at its corporate retreat in Pasadena, California to deliver one of his corporate gospels. But after he postponed the IPO at the urging of SoftBank and other investors and advisers, he backed out of the speech, saying he might come on the last day of the conference, which was that Thursday. Ultimately, he didn’t appear at the gathering at all.

On Sunday, Neumann returned from the Hamptons. The same day, SoftBank’s plan to remove him as CEO of the company became public. Son’s allies included Benchmark’s Bruce Dunlevie and John Zhao, founder and CEO of Chinese private equity firm Hony Capital, both members of the board. By Tuesday, Neumann relented. Before the board was ready to get on a conference call and vote, everyone knew the outcome, and Neumann voted with the rest of the members to oust himself. The decision was unanimous, according to a person familiar with the matter.

He resigned that day and agreed to cede his majority voting rights. Rebekah was out, too.

The Neumanns’ departure marks a seismic shift for WeWork and its culture, which was shaped by the idea that personal and professional life should be indistinguishable. This ethos is on display at the company’s co-working offices, where beer kegs are a fixture. And it’s reflected in the private elementary school within WeWork, which Rebekah said they built to give their children a worthy education, or the time Adam was seen visiting his kids at the school wearing nothing but an open robe and Speedo. (He was coming from the steam room attached to his office.)

In Neumann’s email to staff announcing his departure Tuesday, he suggested the mission hasn’t changed. “When Miguel, Rebekah and I founded WeWork in 2010, we set out to create a world where people work to make a life and not just a living,” Neumann wrote. “I could not be more inspired by everything we have achieved.”

In WeWork’s early days, the founding lore listed Adam Neumann and Miguel McKelvey as the sole creators. Around that time, Rebekah Neumann was acting in a handful of films, alongside stars such as Lucy Liu and Rosario Dawson. Rebekah, who descends from Hollywood royalty and is a cousin of Gwyneth Paltrow, wasn’t around the office much in those days, according to an early employee.

When she was there, Rebekah had strong opinions. She asked to change which color T-shirt employees would wear during move-in day for tenants at new offices. She also wanted to make one floor of an early WeWork headquarters a film production area, two former employees said, and the company built video editing stations and a screening room. Rebekah echoed her husband’s views on work-life balance. “We don’t have a line at all between work and life,” she told Fast Comp

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