The WeWork mess continues, Adam Neumann, Founder Steps down

The New York-based WeWork started with renting out spaces to freelancers, startups, and small businesses, but in recent years has pushed to sign contracts with large companies. 
 

As the time flies after Alibaba and now WeWork would be the financial liability of Softbank, but its investors have known about most of WeWork’s problems for a while. The bubble is getting busted.

WeWork has a serious corporate governance issues and it is the root cause of it . The company’s business itself is coming under additional scrutiny as well. Adam Neumann aged 40, an Israeli billionaire businessman, hard-partying Israeli with long hair and a penchant for leather jackets and tequila. Now, with the step down of Adam Neumann pressure from some of the company’s board members, seems the concept of shared-office company may not going to change the world, what he forecasted to the financers.

WeWork says it’s named Artie Minson, formerly co-president and chief financial officer, and Sebastian Gunningham, formerly vice chairman, as co-CEOs. The pair said it would “be taking clear actions to balance WeWork’s high growth, profitability and unique member experience while also evaluating the optimal timing for an IPO.

Organisations only come because of the less priced space, even certain MNC companies are also preferred to take space and operate in the Wework space.

A US central banker was the latest to cast doubt on the co-working business model. Boston Federal Reserve Bank president Eric Rosenberg warned that the growing popularity of co-working amplifies risks to the US economy during the next economic downtown.

As per the report, WeWork has only $4 billion about a year’s worth of revenue commitments from its members. It has $47 billion of lease commitments—about 28 times its current lease expenses. The Commercial real estate traditionally includes long-term commitments, but WeWork only has long-term commitments for expenses, not revenue. That doesn’t create resiliency. Sources said.

WeWork, the coworking unicorn startup whose IPO has been one of the most highly anticipated public offerings of 2019, has been imploding in recent weeks. SoftBank, a Japanese telecom giant whose $100 billion Vision Fund investment arm has flooded Silicon Valley with money and transformed the industry’s finances, first invested in WeWork in 2017. It now owns nearly a third of the company. Seems it’s  an extraordinary fall for a founder who until recently seemed to be on the cusp of taking a nearly $50 billion company public.

“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive,” Neumann said.

Lastly, WeWork-which this year officially changed its name to the We Company has yet to offer any indication that its business model can be profitable. The company lost $1.93 billion in 2018, on sales of $1.82 billion.sources said.