A seasoned investor, Son wasn’t interested in WeWork to fill Neumann’s pockets.
WeWork’s Adam Neumann arguably got what he deserved when he lost his golden parachute. SoftBank pulling out of the $3 billion tender offer for WeWork doesn’t hurt the company as much as it hurts founder Neumann and the ones close to him. The deal stood to benefit “Adam Neumann, his family, and certain large institutional stockholders, such as Benchmark Capital,” Softbank said. In comparison, WeWork has laid off thousands of employees recently with very little compensation.
Highlights! 7 Reasons WeWork’s Adam Neumann Lost His Golden Parachute
- SoftBank’s investment that Masayoshi Son regrets
- Adam Neumann’s new world for 150 million orphans
- 7 Reasons – Conflict of Interest, more than one
- WeWork’s future – Does it still exist?
SoftBank confirmed that only 10 percent of the offer’s value was held by current WeWork employees. But while SoftBank reasoned that it had no choice but to scrap the rescue deal, citing issues like “multiple, new, and significant pending criminal and civil investigations”, Son’s decision boils down to the fact that Adam Neumann and Benchmark’s equity gain stood at more than 50 percent.
A seasoned investor, Son wasn’t interested in WeWork to fill Neumann’s pockets. He saw WeWork as a company that fit right in with his vision of the future society. But that can hardly be said about Adam Neumann. He is quite the opposite of what investors look for in a CEO, and while he was able to fool the world for a while with his Steve Jobs-ish personality. His conflict of interest inadvertently contradicts with why Softbank made WeWork the biggest bet of its Vision Fund.
So here are the reasons why SoftBank boss Masayoshi Son decided to cut the $970m Golden Parachute of WeWork founder Adam Neumann.
#1 Elevate the world’s consciousness and all that jazz
Both Adam Neumann and his better half Rebekah Neumann talk as if they are destiny’s favorite children. At a WeWork party in 2018, Neumann stated the company’s mission was to “elevate the world’s consciousness” and that “there are 150 million orphans in the world. We want to solve this problem and give them a new family: the WeWork family.”
Similarly, Rebekah Neumann has once stated that when they met, she could tell they were “going to create something that was going to be a large scale for the planet”.
#2 Gender discrimination because she asked not to smoke up
WeWork’s former chief of staff, Medina Bardhi sued Adam Neumann in 2019 alleging that he had belittled her when she asked her to not smoke “aboard a plane”. Bardhi was pregnant. Her lawsuit said that Neuman fired her and instated a male executive at thrice her pay. Bardhi alleged WeWork routinely discriminates against women.
The lawsuit says, “Female employees are demeaned for taking maternity leave, excessive alcohol consumption fuels offensive sexual conduct towards women, and where it is common for women to be paid less than their male colleagues.”
#3 He wanted money for his own company’s logo
WeWork paid Adam Neumann $6million for the trademark ‘We’ which its founder had apparently secured it for another company We Holdings LLC. Facing backlash on this outrageous way of paying oneself, Neuman returned the money.
Similarly, four of the buildings that WeWork leases are owned by Neuman which makes him the landlord as well as the lessee. This has raised conflict of interest concerns among investors.
#4 Just not what Wall Street wanted
When WeWork went to test its mettle at the markets in 2019, Adam Neumann had built up quite a hype and persona which sort of flattered to deceive everyone. In fact, that distracted people from uncertainty, increasing losses and questions on the business model in the long run.
Adam Neumann tried to take the Wall Street for a ride imagining an initial valuation of up to $65 billion. Neumann would have gained a potential $14.3 billion. But Investors scoffed. In the end, WeWork had to scrap the IPO and SoftBank had to haste for a rescue deal.
#5 Chutzpah way out of control
When WeWork went to Wall Street, it was essentially Adam Neumann asking for money without any authority. The floatation prospectus of WeWork warned potential investors that Adam Neumann’s voting control will limit other stockholders’ ability to influence corporate activities.You will find more infographics at Statista
It further said that WeWork may take actions that Adam views as beneficial even if other stockholders don’t. Furthermore, the IPO wanted Adam Neumann’s shares to have 20 times the voting value of ordinary shares. Needless to say what happened next.
#6 Don’t blame it on the smoke
Adam Neumann and marijuana had been in controversy before the gender discrimination case happened in 2019. Neumann smoked up on a private jet on his way from New York to Israel in 2018 summer, as per The Wall Street Journal.
Adam Neumann smoked up on a private jet on his way from New York to Israel in 2018 summer, as per The Wall Street Journal.
When the charter flight airplane’s operator found Neumann’s stash hidden inside a box of cereal, they apparently went so mad that WeWork’s founder had to find another flight to get back to New York.
#7 Elevating his own consciousness
Finally, right after the IPO debacle, news emerged that the authorities were investigating WeWork, scrutinizing Neuman for allegedly indulging in “self-dealing to enrich himself”. In November 2019, media reports cited sources that The New York State Attorney General was behind the investigation.
Furthermore, Adam Neumann had taken the $500million personal loan in September 2019 using WeWork stock to secure it before the IPO. When this news surfaced, Adam Neumann had to step down.
WeWork’s future – Neumann’s Grand Vision looks doomed
SoftBank boss Masayoshi Son has seen enough bad times to know when they are coming. But still, WeWork has turned out to be a regrettable investment for his Vision Fund. In October 2019, SoftBank drafted a hasty rescue deal for WeWork when a planned IPO turned out to be an embarrassment.You will find more infographics at Statista
Softbank is not obligated to offer the $1.1bn in debt financing to WeWork. The company is badly hit due to the global coronavirus lockdowns. WeWork recently stated that it doesn’t expect to meet the 2020 financial targets. However, WeWork still has a $5 billion lifeline from SoftBank which remains.
SoftBank boss Masayoshi Son has seen enough bad times to know when they are coming.
But there are increasingly speculations in the market that it would be better for Masayoshi Son and SoftBank to pull out from WeWork completely. With the business model looking doomed, orphaning one of its biggest bets actually makes sense for SoftBank.