Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

SoftBank Gives ‘Very Public Lesson’ to Founders in WeWork Ouster

Masayoshi Son, long known as a free-spending benefactor who encouraged startup founders to pursue their dreams even if it meant losing billions of dollars, had a different message for entrepreneurs last week: Your dreams had better be profitable.
WeWork Was a Family Affair, Until Things Got Complicated


Adam Neumann spent some of his final days as WeWork’s chief executive officer the same way he had for countless weekends in recent years: surrounded by family at his house in the Hamptons. With the company’s plan to go public smoldering, his control over the business dwindling and its biggest investor starting to turn against him, Neumann gathered his wife and business partner, Rebekah, and their five kids, piled into a car and drove east to the tony beach community.

As the Neumanns unplugged at sundown last Friday to observe the weekly Jewish ritual of Shabbat, SoftBank Group Corp.’s Masayoshi Son was preparing for an ouster. Son’s businesses had more than $10 billion riding on the company in the form of stock and loans. Over the course of a month, financial advisers to WeWork determined that the shares were worth about a quarter of the price SoftBank paid in January. The problem, Son reasoned, was Neumann.

WeWork long had the image of a family business: a husband-and-wife pair at the helm and company slogans about how life is “better together.” Although Adam Neumann started the business in 2010 with Miguel McKelvey, a kindred spirit who, like Adam, spent time on a commune during childhood, they rewrote the founding story over the years to include Rebekah. The three were listed as founders in registration documents for an initial public offering published last month. Rebekah, 41, was also chief brand and impact officer of the parent company We Co., CEO of an education arm of the business called WeGrow and one of three people assigned to select a replacement for her 40-year-old husband if he dies.

There were a lot of things about WeWork that made public investors recoil. For every $1 of revenue, it incurred about $2 in expenses and didn’t make a convincing case it could reverse that equation. It sought to be valued as a technology business but operated much like a real estate company. Its corporate structure looked like a schematic for a microwave.

And the Neumanns seemed to embody it all with a sense of arrogance, as one financial analyst put it. The IPO prospectus offered a litany of apparent conflicts of interest. Adam Neumann hired multiple family members besides his wife, including her brother-in-law, who also left the company this week. Neumann borrowed company money, collected rent from WeWork on space in buildings he owned and charged the company $5.9 million for the rights to a trademark he held on the name “We.” He had effective control of management decisions through stock with special voting rights, though it ultimately wouldn’t be enough to keep him in power.

This account of Adam and Rebekah Neumann’s nine-year reign and swift fall is based on interviews with seven current and former WeWork employees, advisers and investors, and multiple other people familiar with the company. SoftBank declined to comment, as did representatives for Neumann and WeWork, citing regulatory restrictions around a pending IPO.

After an initial onslaught of investor criticism in recent weeks, WeWork took steps to address many of these issues and lessen Neumann’s grip on the company, but he still held onto his job. Son, a 62-year-old Japanese billionaire known for his own eccentricities and mystical pronouncements, had been a giddy supporter of Neumann for years. This appeared to be the case as recently as last week, when SoftBank was anticipating Neumann’s attendance at its corporate retreat in Pasadena, California to deliver one of his corporate gospels. But after he postponed the IPO at the urging of SoftBank and other investors and advisers, he backed out of the speech, saying he might come on the last day of the conference, which was that Thursday. Ultimately, he didn't appear at the gathering at all.

On Sunday, Neumann returned from the Hamptons. The same day, SoftBank’s plan to remove him as CEO of the company became public. Son’s allies included Benchmark’s Bruce Dunlevie and John Zhao, founder and CEO of Chinese private equity firm Hony Capital, both members of the board. By Tuesday, Neumann relented. Before the board was ready to get on a conference call and vote, everyone knew the outcome, and Neumann voted with the rest of the members to oust himself. The decision was unanimous, according to a person familiar with the matter.


SoftBank Gives ‘Very Public Lesson’ to Founders in WeWork Ouster


The chief executive officer of Japan’s SoftBank Group Corp. told company leaders gathered at the five-star Langham resort they need to become profitable soon and stressed the importance of good governance, according to a person who attended the event. Public investors aren’t going to tolerate gimmicks, like super-voting rights or complicated share structures, that privilege founders over other stakeholders, he said, adding they should get in shape years before they consider going public.

The “or else” part of the message became clear just days later when SoftBank led the ouster of WeWork’s controversial co-founder Adam Neumann. The co-working giant’s plans to go public this month imploded, with investors balking at paying a premium for a money-losing real estate venture controlled by an eccentric founder. More WeWork executives with close ties to Neumann quickly followed him out the door.

The messy, high-profile coup tarnishes Son’s reputation for picking winners. But Neumann’s removal also shows a new side of Son -- an investor willing to enforce the kind of discipline that public investors demand at his portfolio companies.

“It’s a very public lesson for all the entrepreneurs,” said Chris Lane, an analyst at Sanford C. Bernstein & Co. “No one will want to be Adam.”

A spokeswoman for SoftBank declined to comment on the private event. The three-day affair also featured a performance from singer John Legend, and a four-legged robot from portfolio company Boston Dynamics stalked across the hotel’s lawn.

Son, the smiling billionaire with a 300-year vision and a goal for his portfolio companies to create “information revolution-happiness for everyone,” has been considered founder-friendly for decades. In 1995, he wrote a $2 million check during his first meeting with Yahoo! co-founder Jerry Yang. Five years later, he invested $20 million in Jack Ma’s Alibaba Group Holding Ltd., a stake that’s now worth more than $100 billion.

That was just a warm-up for his unprecedented $100 billion Vision Fund, raised in 2017. It’s since put money into more than 80 companies in a dizzying array of sectors, from ride-hailing and genomics to vertical farms and satellites. In June, Son claimed his returns were 62% so far. But Silicon Valley venture capitalists were quick to cite WeWork as evidence of SoftBank’s failures.

“Welcoming all the converts to the SoftBank is horrible position,” wrote one VC on Twitter.

Now, SoftBank will have to decide whether to write down the value of its stake. The We Co. IPO has been delayed for now, but when it does occur, the market may value the company at about a third of its valuation when Son last put money into it.

Neumann didn’t make it to Pasadena last week, according to the person. But as the festivities wound down on Thursday, WeWork’s board and its institutional investors including SoftBank arrived at a consensus: WeWork’s IPO could not proceed with Neumann at the helm. It took another three days for long-time SoftBank directors Ron Fisher and Mark Schwartz to get WeWork’s co-founder to come around. On Tuesday, he stepped down from his CEO role, taking the title of non-executive chairman.

SoftBank’s strategy of taking non-controlling stakes in the world’s leading tech companies and encouraging them to cooperate means that Son doesn’t have direct influence on how they are run. But the massive infusions of cash, ranging from about $100 million into the billions of dollars, come with accelerated growth schedules and an increased need for cash.

“If you are dependent on someone to provide the funding, it doesn’t matter how much they own,” Bernstein’s Lane said. “In the case of WeWork, the public markets clearly weren’t willing to step in. Their only viable option was the Vision Fund.”

WeWork isn’t SoftBank’s first intervention. Its investment in Uber Technologies Inc. included a deal to block controversial co-founder Travis Kalanick from taking a CEO or chairman position.

More recently, Brandless Inc. CEO Tina Sharkey stepped down in March in a move that’s been attributed to growing tension with its shareholder. SoftBank had agreed to invest $240 million in installments in the maker of unbranded goods last year. Tensions had arisen when SoftBank began pressuring the company to turn a profit, according to news site The Information, which cited people with knowledge of the discussions who it didn’t name.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×