WeWork’s core “space-as-a-service” business involves turning leased buildings into co-working spaces that offer perks like yoga classes. Under the We Co. umbrella, the company has recently expanded into apartment rentals, data analytics and education.
Neumann was replaced by two co-CEOs: Artie Minson, formerly the company’s co-president and chief financial officer; and Sebastian Gunningham, who was vice chairman. In a statement, the CEOs said the offering was being postponed so the company could focus on its core business, which they insisted remains strong.
“We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future,” they wrote.
The company declined to comment beyond its written statement.
The announcement comes a few days after S&P Global Ratings dropped WeWork’s credit rating from a “B” to a “B-” and its outlook from “stable” to “negative” over concerns about the company’s ability to raise additional capital. Tatiana Kleiman, an S&P analyst who covers WeWork, said the IPO filing made public on Aug. 14 amplified existing scrutiny of the company’s governance practices and strategy.
“It seems that the company is evaluating a lot of things with respect to management composition and strategy,” Kleiman said. “It’s a very fluid and dynamic situation right now."
WeWork’s stumble adds to a rough summer for what was supposed to be a potential record-setting year in tech IPOs. After disappointing debuts earlier this year, both ride-sharing giants Uber and Lyft shares have plummeted in value. Messaging company Slack initially traded higher before falling to about half its opening price. Fitness bike purveyor Peloton also came out of the gate last week with a disappointing start.
The wave of problems has triggered criticism among analysts and investors, some of whom say valuations among tech companies — and those that presented themselves as tech companies — were becoming bloated and possibly contributing to a bubble.
A recent Goldman Sachs report said only 26 percent of companies that completed an IPO in 2018 had positive net income in their first annual report, the lowest share since the first tech bubble burst around the turn of the millennium.
We Co.'s used the word “technology” more than 100 times in its IPO filling, and Chief Product Officer Shiva Rajaraman told TechCrunch in February that the company is “moving toward a Google Analytics for space.” Monday’s statement by Minson and Gunningham indicates WeWork may again return to its real estate roots.
The filing also stated that Neumann’s departure “could have a material adverse effect on [the] business.” The document contains the word “Adam” 169 times.
Neumann’s behavior within the company included walking around the office barefoot, creating an alcohol-focused company culture and saying he wanted to become “president of the world,” according to the Wall Street Journal report.
In a statement announcing his departure, Neumann said the scrutiny directed toward his leadership of the company had become “a significant distraction." He will stay in leadership as nonexecutive chairman of the board.
Clarification: This story has been updated to reflect that Neumann will stay on as nonexecutive chairman of the board.