• Just six weeks ago, co-working giant WeWork was the nation’s most valuable tech start-up.
• Then it filed its S-1 registration for an initial public offering, disclosing a bevy of conflicts of interest and mismanagement by its magnetic and eccentric co-founder, Adam Neumann.
• Investors, reporters, and analysts, chastened after seeing Theranos revealed as a massive fraud and watching Uber fail to live up to the hype, didn’t let another visionary founder pull the wool over their eyes.
• Neumann’s IPO dreams crashed and burned, and now he’s been ousted as CEO and observers are wondering if WeWork can avoid bankruptcy.
• Based on reporting from Business Insider and other news outlets, this is the story of the six weeks that almost ended WeWork.
At 7:12 on a mild late-summer morning in New York City, WeWork’s registration papers hit the Securities and Exchange Commission’s website. The filing, called an S-1, was expected. It was a crucial step in what had been up to that point an exquisitely choreographed march toward an initial public offering for the tech world’s most highly valued start-up.
With its stratospheric $47 billion valuation and preposterously ambitious founder and CEO, Adam Neumann – his goal wasn’t merely to make money, or rent office space, he claimed, but to “change the world” – WeWork had become a glaring symbol of Silicon Valley’s boundless audacity and self-professed exemption from the laws of economics.
In the early morning light, thousands of investors and journalists would get their first real peek at the company’s financial condition and be able to judge for themselves whether WeWork was really, as its founder claimed, on a path toward galactic dominance and unimaginable profit.
Almost immediately, all hell broke loose. A steady stream of rapid-fire headlines detailed Neumann’s self-dealing, mismanagement, and bizarre behavior. Within 33 days the offering was scuttled, WeWork’s valuation plummeted 70% or more, and Neumann, who believed he would become the world’s first trillionaire, was ousted as CEO.What was supposed to be Neumann’s coronation as a visionary became one of the most catastrophically bungled attempted debuts in business history.
It wasn’t supposed to be this way. WeWork was a unicorn, a near-invincible powerhouse flush with venture capital. The most brilliant minds in Silicon Valley and the most powerful global investors had shovelled billions of dollars into its coffers – how could it be anything but a sure bet? Validation from public market investors was a mere formality.
But two things had changed in the nine years since Neumann began constructing the myth of WeWork with the help of starry-eyed tech journalists and hungry investors: Theranos and Uber. In the fall of Theranos, the investing public saw how a multi-billion-dollar alleged fraud could be spun up from Silicon Valley bromides and the image of an idiosyncratic, enigmatic founder who inspired cult-like devotion. In Uber, they saw how machismo, hubris, and accounting tricks could obscure fundamental business challenges.
Unfortunately for Neumann, it was precisely the wrong time to be the visionary leader of a company with imperial dreams and obscure finances. Patience had run out.
This account of the six-week period since that August 14 filing is based on Business Insider’s own reporting, as well as that of the Wall Street Journal, Financial Times, New York Times, Bloomberg, New York magazine, Vanity Fair, and other publications.
WeWork co-founder Adam Neumann Jackal Pan / Getty
Tech-bro mysticism, grueling hours, and Don Julio Tequila
Neumann, a 40-year-old Israeli Navy veteran, is known for his signature look of long unkempt hair above a t-shirt and jeans and bold pronouncements bordering on the bizarre (“On the one hand, community,” he once told New York magazine, describing his simultaneous desire for social cohesion and cut-throat competition. “On the other hand, you eat what you kill.”)
He spent time on a kibbutz, and has described his early life as troubled. His parents divorced when he was seven, and he moved 13 times as a kid and into his teens, according to a Reuters profile. He moved to New York in 2001, when he was 22, to live with his sister, a model, in Tribeca. He attended business school, “hit on every girl in the city,” and built failed businesses around collapsible women’s high-heeled shoes and baby clothes with knee pads (“Krawlers”).
WeWork, which now has 12,500 employees, had always been a little different. Neumann founded it in 2010 with Miguel McKelvey, who was raised on an Oregon commune. The bulk of the firm’s business is in renting out space in buildings, then sprucing it up and parceling out smaller chunks to freelancers, startups, and other businesses for shorter time frames. While WeWork typically takes out 15-year leases, some of its customers can move out in a month.
It often seemed like a real estate company posing as a higher plane of consciousness. Together with his wife Rebekah, a devout follower of Kabbalah and a cousin of Gwyneth Paltrow, Neumann cultivated a sort of tech-bro mysticism, combining grueling hours and always-on expectations with a free flow of alcohol and hippie wisdom. Rebekah started a private elementary school and played up WeWork’s community of tenant-workers.
Adam walked around the office barefoot. He once decreed that no one should eat meat in the office or purchase it on company expense accounts. He also partied hard: Neumann was known for drinking Don Julio 1942, the $149-a-bottle tequila. And he smoked marijuana in the office, at his various homes, and elsewhere, people who’d seen him smoke it told Business Insider.