What Happened to WeWork?

WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey. It is a real estate company that offers shared workspaces for tech start-ups and enterprise services. Their business model was built on complicated arrangements between them and their landlords. Additionally, several conflicts of interest popped up between WeWork and Neumann, providing the momentum for the failed IPO and the ensuing devaluation. 

Very few companies exist that have had a rise and fall more remarkable and elaborate than WeWork. For a long time, the company was under Neumann’s questionable behavior and leadership style. 

Strangely, these traits led to the rise and fall of WeWork. The story of this company is so interesting that it led to a documentary called: WeWork: Or the Making & Breaking of a $47 Billion Unicorn

We’re going to explore this story below. 

Questionable Leadership & Company Culture

The premise of WeWork was simple. They offered a place where freelancers and start-ups could connect with like-minded individuals and collaborate. The employees of WeWork would work long hours, but they were compensated with perks and elaborate parties. Neumann’s leadership blurred the line between work and pleasure, but most stakeholders supported this idea that he believed was representative of the future of work. 

However, Neumann’s business acumen began to garner doubt in 2017 when he told Forbes that the valuation of WeWork was based on energy and spirituality as opposed to revenue. He was accused of using company funds to purchase a private jet, which he filled with so much marijuana smoke that it was detrimental to others. He is also believed to have fired employees for “giving off bad vibes.” 

Many of his former employees have accused him of being toxic, much like a cult leader. They have told stories of him coming into meetings intoxicated, claiming that he would become a trillionaire, the Israeli Prime Minister, and even the President of the United States. 

The Business Model was Unsustainable

The business model for WeWork offered little scope to be profitable. They leased office buildings, turned them into shared workspaces, and offered free beer to their tenants. Rent was paid by freelancers, start-ups, and larger corporations. 

That being said, it’s important to know that WeWork leased buildings. They did not own them. To make a profit, they would have to charge their workers more than they were paying their landlords. 

In 2010, when they first began to lease office space, the post-global financial crisis rent prices kept things stable for some time. However, once the market recovered, they began to negotiate with landlords for reduced/free rent and capital infusions to refurbish some locations. 

WeWork relied on their landlords to keep them open while attempting to build revenue. This was risky and relied on Neumann’s charisma and the novelty of the WeWork vision. Additionally, this strategy made them vulnerable to downturns in the tech start-up world. 

In early 2019, it was discovered that Neumann had a potential conflict of interest when he purchased commercial properties to lease back to WeWork. 

IPO Failure 

The company decided in August 2019 that they were going to file documents for an IPO, even though they lost $2 billion in 2018. Their paperwork was criticized for its epitaph, which stated: “We dedicate this to the energy of we- greater than any one of us but inside each of us.” Additionally, there were several admissions from Neumann that were damming for himself. 

He didn’t seem to understand the consequences of these actions or how they made him and the company look bad. When $37 billion was wiped from its valuation, WeWork went into crisis mode. 

SoftBank Buyout & Restructuring 

Japanese tech investment fund, SoftBank, headed by one of Neumann’s allies, swooped in and saved WeWork. 

They paid Neumann $1.7 billion to step down and took 80% of the company, now worth approximately $8 billion. Later, SoftBank backed out of its agreement to buy $3 billion in shares after Neumann’s indiscretions took a toll. 


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