Exclusive: We Company CEO Neumann starts talks on his role at WeWork parent - sources

By Joshua Franklin and Greg Roumeliotis NEW YORK (Reuters) - WeWork co-founder Adam Neumann has started talks with board directors and investors to discuss his future role, including the possibility of giving up his title as chief executive, at the U.S.

Reuters September 24, 2019 00:07:17 IST
Exclusive: We Company CEO Neumann starts talks on his role at WeWork parent - sources

Exclusive We Company CEO Neumann starts talks on his role at WeWork parent  sources

By Joshua Franklin and Greg Roumeliotis

NEW YORK (Reuters) - WeWork co-founder Adam Neumann has started talks with board directors and investors to discuss his future role, including the possibility of giving up his title as chief executive, at the U.S. office-sharing start-up, people familiar with the matter said on Monday.

Neumann has not yet agreed to step aside as CEO of WeWork parent We Company, and there is no certainty he will do so, the sources said. However, a board challenge planned by investors, including SoftBank Group Corp and Benchmark Capital, has been put on hold until these discussions produce an outcome, the sources added.

Were the talks with Neumann to lead to a resolution, they could avert a showdown between SoftBank and one of its biggest investments. We Company postponed its initial public offering last week following push-back from perspective investors, not just over its widening losses, but also over Neumann's unusually firm grip on the company.

This was a blow for SoftBank, which was hoping for We Company's IPO to bolster its fortunes as it seeks to woo investors for its second $108 billion Vision Fund. It invested in We Company at a $47 billion valuation in January.

But investor skepticism led to the start-up considering a potential IPO valuation earlier this month of as low as $10 billion, Reuters reported.

One possibility that Neumann is discussing is transitioning to a chairman role, the sources said. Details of the discussions and what Neumann would request in exchange for giving up his CEO title could not be learned.

Another option would be for Neumann to remain as CEO, with an independent chairman brought in to join the board, according to one of the sources.

Were Neumann to agree to a leadership transition, it would make it unlikely that We Company can proceed with its plans to complete an initial public offering by the end of the year. This would mean it would have replace a $6 billion debt deal it reached with banks this summer that is contingent on the start-up going public.

We Company is considering slowing its expansion so it burns through less cash and would therefore require less funding in the absence of an IPO in the near team, one of the sources said.

The sources asked not to be identified because the matter is confidential. WeWork declined to comment. Neumann did not immediately respond to requests for comment.

As co-founder of We Company, Neumann holds special voting shares that enable him to dismiss dissident board directors and shoot down any challenge to his authority.

However, SoftBank also has leverage. It could choose not to back We Company's IPO or provide it with more funding. It has already funded the cash-burning start-up to the tune of $10 billion and was discussing committing another $1 billion to the IPO.

POWERFUL CEO

It is not uncommon for founders of fast-growing start-ups to be eccentric and control their companies tightly, even as they seek to attract stock market investors. Neumann, however, was criticized by investors and corporate governance experts for arrangements that went beyond the typical practice of having majority voting control through special categories of shares.

These included giving his estate a major say in his replacement as CEO, and tying the voting power of shares to how much he donates to charitable causes.

Neumann also entered several transactions with We Company over the years, making the company a tenant in some of his properties and charging it rent. He has also secured a $500 million credit line from banks using company stock as collateral.

Following criticism by potential investors, Neumann agreed to some concessions without relinquishing majority control. He agreed to give We Company any profit he receives from real estate deals he has reached with the New York-based start-up.

No member of Neumann's family will be on the company’s board and any successor will be selected by the board, scrapping a plan for his wife and co-founder, Rebekah Neumann, to help pick the successor.

These changes did little to address concerns about the business model for We Company, which rents out workspace to clients under short-term contracts, even though it pays rent under long-term leases. This mix of long-term liabilities and short-term revenue raised questions among investors about how the company would weather an economic downturn.

(Reporting by Joshua Franklin and Greg Roumeliotis in New York; Editing by Dan Grebler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.