Elizabeth Warren Targets WeWork’s Layoffs and CEO
Over the weekend, Senator Elizabeth Warren targeted WeWork (WE). Warren said it’s a “rigged and corrupt system” for giving a “$1.7 billion golden parachute” to Adam Neumann while laying off 2,400 people. She added, “I’m fighting my heart out to put power in the hands of American workers.”
WeWork lays off thousands, gives former CEO millions
Last week, CNBC said that The WE Company, the parent company of WeWork, is firing 2,400 people. Supposedly, this will “create a more efficient organization.” “The 2,400 lost jobs amount to about 19% of WeWork’s workforce of 12,500 at the end of Q2,” noted Market Realist analyst Mike Sonnenburg. The controversies, the drop in WeWork’s valuation, and the failed IPO attempt are weighing down the company. This is on top of The We Company’s co-founder and former CEO Adam Neumann walking away with a handsome $1.7 billion.
Elizabeth Warren’s attack comes at the time when Softbank (SFTBY) is going ahead with a $3 billion WeWork shares tender offer at $19.19 a share. The offer will give a chance to early investors and employees to monetize their shares while helping Softbank increase its stake. As a part of the tender offer, Adam Neumann will also encash $970 million from selling his remaining shares in WeWork. Thus, he is taking his windfall from WeWork exit to $1.7 billion.
SEC is also watching WeWork
A few days ago, Bloomberg reported that the SEC is inquiring about the possibility of WeWork’s non-compliance with SEC rules. The SEC hasn’t disclosed what the probe pertains to. However, there are enough red flags in the WeWork saga to require regulators’ attention.
First, The We Company may have used manufactured metrics like community-adjusted EBITDA to show its business in a better light. Second, WeWork’s fell from a $47 billion valuation to the one in single digits. This is also on the radar of the regulator, although The We Company is not a public company. Controversies related to Adam Neumann will be a talking point among regulators, just as it is among analysts and politicians.
Adam Neumann’s shadow
Adam Neumann was the face of The We Company for much of the company’s existence. All of that changed after the company failed to go public and subsequent bailout by Softbank. Now, The We Company is trying to forget Adam Neumann. Softbank’s Masayoshi Son admitted that giving Adam Neumann a free rein was a “really bad” judgment call.
The We Company’s 3Q earnings presentation released after Adam Neumann’s exit tried to show how WeWork of now is different from the WeWork of the past. The We Company presentation said that the company’s focus was on non-core, early-stage ventures until September 2019. It calls the member experience in the past “distracted.” Also, the presentation calls the past leadership style “Founder-led.” This refers to the larger-than-life image of Adam Neumann when he was leading WeWork.
While Softbank-owned WeWork is trying to start afresh, the shadows of the past are hard to ignore. Especially when a presidential candidate is watching! For Masayoshi Son’s Softbank, The We Company saga has become an Achille’s Heel. There are reports that the company got a lackluster response for its ambitious Softbank Vision Fund 2.