WeWon'tWork: CEO Adam Neumann enters Low Earth Orbit to declare, I'm outta here

WeWork's wildman CEO and co-founder Adam Neumann has been pushed out as chief exec of his post-profit property management biz. The board of directors today confirmed rampant speculation that Neumann, who started the global-spanning office subletting shop in 2010 with Miguel McKelvey, was about be kicked out of the top job. …

[Imhotep]

The first little pig built his house out of what was freely available in the cow pasture

Larry Ellison had some interesting comments recently on WeWork and Uber. And I found myself agreeing with him, which was a little disquieting.

Basically, he said both companies were worth nothing.

[paulf]

Re: The first little pig built his house out of what was freely available in the cow pasture

The story on Barrons for anyone interested

[Anonymous Coward]

It's not surprising to see them torching staff. What is surprising is that 5,000 employees would be one third of the total. Why would a company that just leases and subleases office real estate need 15,000 employees? What do they do, and why? This is the kind of company that would normally have a staff of 50 or so, most of whom are lawyers, finance experts, or real estate experts. I will admit that I did not read the S-1 because I don't consider this company investable anyway, with or without Mr. Neumann, so perhaps someone who did can explain what all those people are doing. Or more likely not, which is why they're getting the boot.

[Troutdog]

I think many of those people are on-site staff for all the office space. Sales, security and maintenance mainly. The space you rent from them is managed. The basics are provided by them: power, networking, janitorial, heat, shared kitchen with coffee and other stuff etc. Direct WeWork employees take care of most if not all of that crap.

My current employer was located in Wework space for the first 18 months of business, until we grew out of it. You can rent anything from shared space access (cheapest) to as many desks as you care to pay for.

Full disclosure: I do not plan to invest either. Just relaying my experience.

[Anonymous Coward]

"during a late-night all-hands meeting, fired seven per cent of its staff then promptly treated the remaining bewildered employees to trays of tequila shots as rapper DMC, of Run-DMC fame, burst into the room to perform a rendition of It's Tricky."

... I bet the writers of Silicon Valley are now feeling pretty low as they realize how WeWork has outdone their scripts which I assume they assumed were OTT even for tech startup standards.

[Imhotep]

I Don't Think That Word Means What You Think It Means

From the Wall Street Journal today: "The co-founder’s magnanimous personality helped propel the office-sharing business to an outlandish valuation."

I'm not quite sure what magnanimous means in that context.

[JasonLaw]

Not a tech company

They had the inflated valuation because they positioned the company as a tech business. It wasn't. It was a boring office rental business. I say "was", because it will be past tense pretty soon...

[Charlie Clark]

Re: Not a tech company

Actually, the inflated value was part of Softbank's market manipulation: show how well the vision fund is doing (apart fom ARM, it's a toilet) so that more people will invest in the next one. Some of this is little different to the usual "pump'n'dump" schemes. Just on a larger scale.

[I ain't Spartacus]

Re: Not a tech company

But Softbank have invested in Uber too! And that's going so well...

[Doctor Syntax]

"a massive round of layoffs, as much as 5,000 people or one-third of the total workforce, will be rolled out later today"

Assuming they get the money due to them they might soon realise they're the lucky ones.

[Red Ted]

Is it just me?

Or is the current round of stupidly high IPO valuations for several companies reminding me of a situation about 20 years ago, that ended so well?

[Mr Sceptical]

Re: Is it just me?

You're on the money (see what I did there) - because you have an ability to recall history. Something that seems sadly lacking in the Finance industry.

It's not helped by the relatively short life-span of the average investment banker types who cash out nice and early and avoid the consequences of their actions while spending more qualtity time with their family, sorry, money.

Icon cause this ain't the last time this'll happen -->

[paulf]

Re: Is it just me?

And it'll keep happening for as long as charismatic Buzzword Bingo champion Gimboids persuade gullible and greedy financiers with those dangerous words, "This time it'll be different".

[Cuddles]

Re: Is it just me?

I don't see the problem. People will always want tulips.

[c1ue]

WeWork increasingly looks like an extraordinarily public SPV to pump up the value of its investor's (and CEO's) real estate holdings.

Look at the early investors and also who owns many of the high profile buildings WeWork leases.

The scam would be: a building with a low vacancy rate can be worth literally multiples of a building with a high vacancy rate. An investor who put $10M in WeWork, but had WeWork lease their New York building, would see the building's value increase $50M or more. Sell building, reap cash, wait for WeWork to fail and stick the new owner with a high vacancy building.

Whether WeWork IPOs, for these investors, is largely irrelevant.

It is also interesting to see JPM's involvement with Neumann and WeWork...since JPM also represents a lot of these real estate ownership groups...