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Sep 27, 2019

The WeWork IPO really didn’t work. Yet. Who is that affecting?

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Employees at the co-working unicorn are stuck in IPO limbo and may suffer losses.

It’s been quite a couple of weeks for the co-working unicorn WeWork. The company’s valuation dropped by tens of billions of dollars, and the initial public offering has been delayed. Its public IPO filings made people’s hair curl with stories of CEO self-dealing and sketchy corporate governance. Then, earlier this week, CEO Adam Neumann resigned. But he still leads the board.     

So now, more questions. Does WeWork work as a business? And what does all this upheaval, especially the delayed IPO, mean for the employees, who have stock in WeWork that is worth less every single day?

I asked Shira Ovide, a Bloomberg opinion columnist covering technology, how bad it is to be a WeWork employee right now. The following is an edited transcript of our conversation.

Shira Ovide: People who work at startups and get stock for working there, they’re also, basically, the low man on the totem pole. If a company gets sold, they’re the last ones whose stock gets paid out. If there’s not enough left over if a company is sold, or if the value of the shares goes down, they’re often the ones that are left holding the bag — their stock is either worth significantly less than they expected or worth nothing.

Molly Wood: You also wrote recently that you are not confident that Adam Neumann stepping down as CEO fundamentally clears the path to an IPO. Tell us more about that.

Ovide: Everyone who made WeWork the way it is, both good and bad, is still at the company. Notably, Adam Neumann owns a significant percentage of this company. He’s going to be the nonexecutive chairman, which means he leads the board, and he’s going to have a significant influence. The investors in this company knew exactly how this company was being run, they let it get this way and they’re all still there — many of them are on the board. That includes SoftBank, the large Japanese conglomerate, that has poured more money into WeWork than any other single individual or institution — they’re still there. The bankers and lawyers who worked on this IPO, they’re all still there. Everyone should get blame for making WeWork the mess that it is. Most of them are still around and still influential at the company.

Wood: One of the other things about the WeWork story that we are doing right this minute is lumping it in with the tech industry writ large, when in fact there is not a lot of tech involved in running the business. I wonder, did these trappings of tech industry, including an outsized personality as a founder, help create this image that allowed it to attract so much investment?

“I think Masayoshi Son totally bought into the WeWork vision and was the biggest believer in Adam Neumann [pictured above] and WeWork even in the face of doubts from his own investors,” Ovide said. (JB Lacroix/Getty Images)

Ovide: You’re right. On the one hand, WeWork is not a tech company. I keep saying, “I don’t know why I’m writing about this.” This is a real estate company. I don’t know anything about real estate companies. On the other hand, the thing that WeWork shares with a more conventional tech startup is the investor base and the culture. The whole point of WeWork, the reason WeWork was worth $47 billion, is that it’s not just an office leasing startup, or that wasn’t its ambition. It had this grand idea to make office leasing the hub around this vision of a different way of life for people, more communal living. It wasn’t supposed to just be an office leasing startup, and that is part and parcel of the attitude now. In tech startups, the ideas must be big or there’s no point to them. Also, the money here is big. And again, these are some of the same investors who are putting money into companies like Airbnb, and Uber, and other tech companies. The idea is that if you pour as much money as you possibly can into a young company, you can essentially make it a fait accompli that they succeed. So they can expand as fast as they possibly can into every country, they can fulfill the wildest dreams of the founders. And basically, you leave the founding team alone to do whatever they want. The upside of that is you can get these highly successful magical companies. You might get the next Google or Facebook, or you could let this company spiral into a self-dealing mess, as WeWork got without any brakes on the founders who run the company.

Wood: On that note, I think we’ve been asking this now for years, but seriously, are we close to done with the cult of the founder yet? Any sign of that waning?

Ovide: I am of the belief that no one learns any lessons, so no. I think the problem is there is enough good examples of empowering, smart and successful people. There are enough examples of that working out, [like] Facebook or Google or Amazon’s situation. That overrides the terrible situations like WeWork or Theranos or other kinds of companies like that.

Wood: This is a little in the weeds, but this is the second major SoftBank-backed company that’s had to have its CEO removed in advance of, hopefully, an IPO. And I saw somebody tweet the other day, “What does this say if you are a founder at another SoftBank-funded company,” because they really are propping up a lot of companies with a lot of money. Do you think founders are starting to get a little nervous that they’re not as safe as they maybe used to be?

Ovide: I don’t know. You’re referring to Uber and Travis Kalanick. The difference there is that SoftBank wasn’t involved in the unseating of the CEO, where they came in after. But you’re right, the situation at WeWork is odd because the whole MO of SoftBank and Masayoshi Son, who heads SoftBank, is we give founders giant pots of gold, and we let them dream big and get out of the way. I think Masayoshi Son totally bought into the WeWork vision and was the biggest believer in Adam Neumann and WeWork even in the face of doubts from his own investors. There were investors in SoftBank’s investment fund that didn’t want to put money into WeWork at a large valuation because they were worried about the company. And so Son put in SoftBank’s own money into the company. There were many doubters, and Son believed until the last few days, he apparently changed his mind. I don’t exactly know what happened. But you’re right, that has to make any future founder think, “Maybe I’m not as safe as I think. Yeah, I have these extra voting shares that give me enormous power over this company. And yeah, this billionaire who poured money into my company thinks I’m a genius.” But that’s the nature of billionaires that they can change their minds on a dime.

A SoftBank location in Tokyo. (Kazuhiro Nogi/AFP/Getty Images)

Related links: More insight from Molly Wood

Now you know things are getting serious at WeWork because Business Insider reported Thursday that the company is selling the fancy $60 million personalized private Gulfstream jet that now former CEO Adam Neumann used to fly himself and his family around the world. Some workers told Business Insider that they spent days downloading TV shows and movies for the Neumann children to watch on the plane. And yes, other employees said that when they didn’t get bonuses or pay raises, the whole fancy jet thing was more than a little annoying.

Forbes has story about all the other things WeWork is selling in order to cut costs, including three companies that it acquired in the last couple of years. No word on what might happen to employees at those companies. And of course, there are reports that WeWork could have to lay off as many as 5,000 workers to reduce costs.

When private companies with no oversight fly too close to the sun in their private jets, somehow, it’s only the people on the ground who get burned.

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