BY ROBERT CYRAN

WeWork’s goal to occupy the airy penthouse of corporate finance hasn’t gone to plan. The office-sharing startup, led by high-profile co-founder Adam Neumann, had hoped to be valued at more than $47 billion in its initial public offering. Now Neumann is stepping down as chief executive, adopting a non-executive chair position, and giving up voting control. An IPO in the foreseeable future looks highly unlikely. From here the company’s drama will mostly play out in private, which is where it belongs.

Investors like Japan’s SoftBank ought to have realized long ago that Neumann was an inappropriate leader for a listed business. His claims that the firm’s valuation was based in part on spirituality and energy, his variable focus on investing in everything from elementary schools to wave pools and his many related-party conflicts would have been problematic even in a company that wasn’t burning cash. The firm’s valuation has imploded, to about a fifth, or perhaps less, of its last funding round.

Having Neumann step down and relinquish majority control is necessary, but insufficient. The firm needs more capital – perhaps $15 billion by 2023 according to a Breakingviews calculator – and proof its business can be profitable. It also needs to find a new permanent CEO who can work with Neumann as their non-executive chair. Given the turmoil and uncertainties, Neumann’s demotion may be enough to secure more capital from backers. But having caught a glimpse of the penthouse, the metaphorical equivalent of a windowless basement must be even harder to bear.

First published Sept. 24, 2019

(Image: REUTERS/Eduardo Munoz)