The Freefall Moment When WeWork Turned Into WTF
In 2019, the company some had valued at more than $50 billion was ready for its IPO. But when Wall Street took a harder look, the wheels started coming off the bus.
On Monday, September 16, Jen Berrent and Artie Minson met in the lobby of JPMorgan’s headquarters at 383 Madison. The two longtime Neumann deputies were due to meet with Mary Callahan Erdoes and Noah Wintroub soon, but they needed to get on the same page.
They sank into chairs in the black-and-white-tiled lobby of the octagonal building—one built for Bear Stearns before its rapid collapse—which was adorned with screens flashing JPMorgan marketing materials. It had been a rough couple of weeks for the two senior WeWork executives. Berrent, normally unflappable, felt a constant cloud of anxiety as things began to look increasingly bleak for the IPO.
Soon after they began talking, they both realized it was time to acknowledge reality. Things weren’t going well. Their ship was taking on water faster than they could bail it out, the two agreed. Both longtime Neumann defenders had lost faith in him.
WeWork had become a laughingstock. The corporate governance problems, the investor meetings where Neumann’s pitches fell flat, Neumann’s inability to stay on script—it was all too much. Adding to the pressure was the forthcoming Wall Street Journal story that looked as though it would highlight Neumann’s erratic leadership. If WeWork went ahead with its road show and then the Journal’s article on Neumann came out, it could be a disaster. WeWork might have to pull out of its IPO plans at the last minute. That could be a hugely damaging event, preventing the company from ever coming back to try again, Minson worried. Berrent had other concerns. Neumann’s inability to stay on message when talking with investors presented a huge legal liability; they could be sued if it happened during the road show, she feared.
A glitzy video wasn’t going to save this. It was time to pull the plug before they reached the point of no return, the two concluded. WeWork wasn’t going to be able to pull off its IPO.
It wasn’t their decision to make, but they needed to tell others. The two zipped up the JPMorgan elevator to meet with Erdoes and Wintroub. In Erdoes’ conference room atop the office tower, they outlined their discomfort with Neumann’s recent erratic behavior and their fears about the IPO.
Before they got far, though, Erdoes and Wintroub offered a new wrinkle. A junior banker from Goldman Sachs who was present the prior evening at the road show taping told the IPO team that Neumann had smoked pot during the taping—a wildly irresponsible move on the cusp of an IPO, if true. Taken with the Journal’s marijuana anecdote, it could even invite legal questions for the bank and its ability to take WeWork public.
Minson and Berrent were exasperated but not surprised. They all agreed that Neumann needed to be persuaded to call off the IPO. Berrent and Minson decided to call Neumann. He should come to the bank, Berrent told him.
When he arrived, Neumann was already furious—upset they were meeting without him.
Minson quickly took Neumann aside to question him about the previous night. Were you smoking pot while you were filming the video? he asked. Neumann vehemently denied doing so.
“No,” he told Minson—absolutely not. Minson was skeptical. Wintroub asked the same question inside the conference room. Neumann looked at Wintroub directly and told him he had not smoked pot while he was filming.
“I swear on my life and my children I would never do that,” Neumann told him. (Subsequently, multiple others present at the filming backed up Neumann’s version: they didn’t think he smoked marijuana that night.)
They moved on. Neumann wanted to highlight some progress. He insisted everyone watch the video he had filmed through the marathon session the day before. The result was “amazing,” just watch, he told the group.
But as they watched the video together with Neumann in JPMorgan’s office, Neumann’s words rang hollow. The man atop WeWork, who was once able to hypnotically paint a picture of an empathetic global business that would transform how people worked and lived, was coming off as manic, unhinged, and slightly incoherent. For Minson, Berrent, and Wintroub, it was as if Neumann had broken the fourth wall—the invisible barrier that separates actors from their audience. They could at once clearly see the weakness of his theatrics alongside his delusions that it was a riveting performance. While his dysfunctional behavior and antics had caused resentment in each of them at different times over the past few months, the video was especially painful.
The team told him what they’d discussed. Their recommendation was to stop the IPO—for now. They could get temporary financing and wait a month or two—or more, they said. With more time, they could figure out how to better cast the company—to somehow win over investors who viewed the company as toxic.
Then Erdoes—who had devoted much of her summer to Neumann and WeWork—said out loud a thought that had popped into the minds of most every senior person involved with the IPO. Maybe it would be best for WeWork if you aren’t the CEO, she said. Many potential investors don’t think you should be in that role, she told him. The focus of all the problems, the investor concerns, the negative press deluge, Neumann was the tie that bound them all.
Neumann seemed struck by a train. It was hard to process. Seconds later, Minson walked in the room—he had stepped out for a minute while Erdoes was speaking—and Neumann started yelling. “Mary, tell him what you said,” Neumann said, looking back and forth between Erdoes and Minson. Erdoes recounted her suggestion, while Neumann looked on, wild-eyed in disbelief. “Do you think I should resign?” he asked Minson, incredulous.
Minson demurred, telling him it would be best if he calmed down. Neumann ran into Jamie Dimon’s office a few doors down in a panic. There, he found the chief of the nation’s biggest bank similarly aligned against him. Dimon agreed with Erdoes, the veteran bank CEO told him. Neumann didn’t know what to do. He had built WeWork. It was his company.
Eventually, Neumann calmed down. The group agreed to defer the decision for the time being. Goldman’s team, including Kim Posnett and David Ludwig, had told Neumann earlier in the day that they saw a way for the IPO to move forward. There was still a price—maybe not a great one for Neumann or WeWork—at which investors would buy in.
Neumann considered his options. Eventually, he relented and agreed to a pause. WeWork would delay the IPO for a month or two and reconvene. Neumann would remain the CEO. Neumann even became contrite. I’ll get this right and fix it all with you, Neumann told his closest advisers, showing a rare vulnerable side. It seemed like a sincere appraisal of the situation—an apology for his own mistakes.
Later that afternoon, word got out. The Journal first reported that WeWork’s troubled IPO was off, and the news ricocheted.
The roster of other banks working on the IPO in lesser roles—like Bank of America, Citigroup, UBS, and Credit Suisse—had been eagerly awaiting updates. (Morgan Stanley, whose top tech banker Michael Grimes had warned Neumann months earlier that investors could be wary of WeWork’s business model, was one of the only major banks to opt out of working on the company’s IPO.) Yet for much of the day Sunday, the eve of the expected road show kickoff, WeWork wasn’t telling them anything about the status. Bankers weren’t getting calls returned; WeWork had gone dark. Then Monday afternoon, the bankers saw the headlines and shook their heads. Some had already flown in from California.
At WeWork’s headquarters, rank-and-file employees were gobsmacked. Their company had been in the spotlight for weeks, and none of the news was good. But canceling the IPO was an un- expected blow. Staff traded rumors Monday evening, waiting for updates from the company. Those with stock options began to wonder if they’d ever be able to cash in any of their WeWork shares. The only official communiqué the staff got was a late-night email inviting them to watch an all-company webcast the next morning at 11:00.
In London, Masayoshi Son’s deputies Rajeev Misra and Munish Varma attended a small dinner with a group of investors, including Ibrahim Ajami, the head of Mubadala’s venture arm, and executives at Saudi Arabia’s sovereign wealth fund, in the pink-walled, flower-lined private dining room inside Annabel’s, a tony members-only club. Throughout the dinner, where they all shared bottles of wine and ate Parmesan-crusted salmon, the conversation turned to WeWork and where the IPO might price. One attendee— Court Coursey, a managing partner at TomorrowVentures, Eric Schmidt’s venture firm—said that investors were more likely to buy in if WeWork was valued around $7 billion to $8 billion. Misra— who excused himself several times during the dinner to take urgent phone calls—and the other SoftBank executives glared at him.
Eventually, the conversation became more subdued and awkward. They’d all seen the headlines flash. WeWork would be postponing its IPO.
No one stayed for dessert.
Adam Neumann stood stiffly in his office Tuesday morning, feet planted behind a clear lectern with “We” imprinted on its front.
It was a different Adam Neumann from the one the company was used to.
He wasn’t speaking to a crowd—just staring straight into a camera that was piped into the livestream on phones and computers throughout the We empire. The shot was backlit; light poured in from windows behind him. And Neumann was clad in a gray suit and bleach-white shirt with the top button undone, his neck-length hair flowing back behind him. He looked like a kid from junior high forced to wear a suit to a cousin’s wedding. “We’ve been humbled by this experience,” he said.
WeWork would still go public, he told his employees. It would just be a bit later—perhaps October or November. He listed off stats to extol how great WeWork was doing, and he pledged to step up communications with everyone. He’d hold weekly all-company meetings for the rest of the year. WeWork would improve; the trick was simply figuring out how to understand public market investors. As Neumann spoke, it was clear to some that he hadn’t absorbed exactly what went so wrong—why the public markets didn’t accept him the way the long roster of private market investors had in years past. All he knew was that things were different.
WeWork, he said, “played the private market game to perfection.”
As for the public markets, he added, WeWork was still learning the rules of the game.
The next day, Wednesday, on the other side of the country, Masayoshi Son was hosting a three-day summit for the Vision Fund’s portfolio companies and its investors at the posh Langham Huntington in Pasadena, a five-star hotel originally constructed in 1907 that sits beneath the San Gabriel Mountains.
The event was a celebration of all things Vision Fund, and Son was putting on a show. John Legend would perform, and the fund’s investors, CEOs, and advisers—from PIF’s Yasir al-Rumayyan to OYO’s Ritesh Agarwal to Arianna Huffington—would attend. The gathering was part of Son’s effort to convey excitement about the Vision Fund, just as he was trying to drum up interest in another $100 billion–plus for a sequel fund.
But that morning, with guests already chatting about the woes of WeWork, the Journal published the story Neumann and his bankers had been bracing for. “Adam Neumann was flying high,” the article began. As WeWork had feared, it painted a portrait of a hard-partying, erratic leader of a troubled company—one who pushed for his own interests over others’ and had something of a messiah complex. The story was quickly passed around the Langham, and the crowd buzzed anew about their troubled SoftBank-funded sibling.
Now Son was being humiliated by events during his own conference. A company he was loudly evangelizing just months earlier was undergoing a spectacularly high-profile implosion. He’d directed $10 billion into WeWork. He had two seats on the company’s board of directors. WeWork was one of the largest investments of the Vision Fund, and just as he feared earlier that month when he met Neumann, a failed WeWork IPO would ruin his attempt to raise money for Vision Fund 2.
Not only was it clearly a disastrous investment, but it undermined his thesis about the genius of founders—about giving them money with few strings attached, simply trusting their vision. If that wasn’t enough, the article’s lead anecdote of the jet trip to Israel was a particularly bad look for Son. Marijuana use—and its cross-border transportation—isn’t viewed as permissively among Japanese investors as it is in the United States.
One attendee walking through the conference overheard Mark Schwartz—one of two Son allies on WeWork’s board—in a corner speaking Neumann’s name loudly with expletives mixed in. Schwartz, investors, and CEOs gave Son advice on the sidelines of the conference.
Neumann, they told him, had to go.
For almost a decade, Neumann’s backers thought he could do no wrong. He had shifted people’s perception of reality, persuading one after another of the world’s top investors to come along for the ride, boosting WeWork’s valuation and pumping the company with more money every time.
Little else mattered so long as WeWork’s shares were going up in value. It didn’t matter that Neumann publicly said WeWork was profitable when it wasn’t or that he took out hundreds of millions of dollars to spend on homes and staff that trailed him around; it didn’t matter that WeWork was spending $2 for every $1 it took in; it didn’t matter that WeWork was a real estate company. None of it mattered because Neumann was able to convince the market that WeWork had extraordinary value—that its future as a ubiquitous world-changing corporation was inevitable. Millions became billions on paper—so long as everyone was buying what Neumann was selling.
Now, though, his magic was gone. He was no longer a visionary able to move mountains. He was a meme—a caricature of an irresponsible CEO, driven by avarice and narcissism. Now that the public market investors had made clear they didn’t think WeWork was even a $15 billion or $20 billion company, it was obvious the billions on paper had vanished. Neumann’s power—his invincibility—plunged with it.
So the knives came out.
Board members, long in Neumann’s thrall, began talking to one another as the week progressed—without Neumann on the calls. It was clear something needed to be done. Any action would be tricky and likely require Neumann’s eventual assent. While the board of directors had the power to fire Neumann, Neumann also had the power to fire the board of directors—to wipe it clean and appoint new ones himself. That’s what founder control meant.
Still, Neumann’s invincibility wasn’t absolute. His iron grip was undermined by the giant losses he’d allowed WeWork to accumulate under his watch. The reality was that WeWork would need more money. Lots of it. If Neumann became enmeshed in a lengthy legal battle to fire his board, it would be unlikely that anyone would fund WeWork as its cash ran out.
SoftBank’s Schwartz, who had recently praised his leadership in board meetings, was among the most eager to push Neumann out. On the question of removal, he and Ron Fisher were clear yeses.
The other power center of the board was the early investors, Benchmark’s Bruce Dunlevie, Steven Langman, and Lew Frankfort, the former CEO of Coach who hadn’t been closely involved with the company for a few years.
Dunlevie had the most at stake, and the others were likely to follow the lead of the respected Silicon Valley investor. Not only did Benchmark own around 9 percent of the company, but this was the highest-profile investment Dunlevie had ever shepherded at the tremendously successful firm he’d co-founded more than two decades earlier. He’d long believed that Neumann’s vision and salesmanship outweighed his flaws. He figured the public markets could make him into a better CEO; all he had to do was get there.
As Neumann’s antics and WeWork’s finances became increasingly indefensible, partners at Benchmark grew frustrated. Bill Gurley and others at the firm believed that Neumann was out of control, but Dunlevie continued to take a soft touch, voting to approve purchases like the jet and power grabs like the twenty-to-one share structure, even as he voiced criticism. It was a particularly bad look, given that Benchmark was an early investor in two other high-profile startups that had been criticized for governance or culture problems, Snap and Uber, where Benchmark eventually pushed to remove CEO Travis Kalanick.
Dunlevie had his limits. With the company clearly unable to IPO, he felt he couldn’t trust Neumann anymore—not to lead the company, or even to tell him the reality of what was happening inside it. Neumann needed to step aside.
He wanted to tell him in person and asked Neumann to meet him for dinner in New York on Sunday. Langman would join, too, as would Michael Eisenberg, Dunlevie’s onetime colleague. Eisenberg, while not on the board, had been working the phones in recent days, staying in touch with much of the board and senior staff. He, too, came to the conclusion Neumann had to go. They all booked flights to New York.
Neumann could feel the coup coming. His board played their cards close, but ever since Mary Callahan Erdoes had posited the notion of his stepping down, the idea hung in the air.
Frazzled, he holed up mostly at his home in Gramercy, with a brief weekend trip to Amagansett. He called many trusted aides to hunker down with him in his home office as he tried to figure out what to do. He didn’t want to lose WeWork. His initial instinct was to fight.
The head of Neumann’s personal investments—Ilan Stern—raced to understand Neumann’s legal rights and what a fight with the board might look like. He had spent several days in a WeWork conference room with two deputies shuttling between bankers and WeWork executives, immersing himself in the details of Neumann’s stock holdings and how his wealth was intertwined with the com- pany. Meanwhile, Bob Schumer, Neumann’s personal lawyer at Paul, Weiss, dived into the issue. Neumann even began to keep a PR person—Laurie Hays from Edelman—close by his side, separate from WeWork’s PR team. His interests were diverging from the company’s.
He paced around the streets near his building, calling allies, friends, and investors. On one such jaunt, he was wearing black jeans and walking barefoot on the gum-tarred Manhattan sidewalk, barking into a phone, his hair frizzy. An onlooker snapped a photo. When it was uploaded to Reddit days later, it spread swiftly around the internet. It captured the mood perfectly: a onetime tech guru looking frazzled and unhinged.
The opening shot was heard through WeWork’s PR department. On Friday, the Journal was working on a new story—that SoftBank wanted Neumann out as CEO—and it called the company for comment. The harried Neumann raced to shore up the board members he thought were his allies. He called Dunlevie, who was vague and noncommittal.
It was a bad sign. When friends and allies paid him a visit at his carriage house Saturday evening, it seemed like a wake. He was quiet, lacking exuberance. It was clear he had little support at the company.
Neumann began to openly ponder stepping down. He asked Berrent and Minson to come over Saturday night. He sounded them out on who might step into his role. Would Berrent leave if Minson got the job? he asked.
On Sunday, the Journal published its story. It was just focused on SoftBank and its desire to push out Neumann, but he could feel the walls closing in. His allies on the board were clearly not offering him vocal support.
A battle with the board wouldn’t be pretty. Stern, having researched the matter all week, told Neumann it would end badly for everyone. If the rest of the board wanted Neumann to go, Neumann would need to fire the board to keep control of the company, and a legal fight would likely ensue. Then WeWork would soon need a heavy injection of money. If Neumann were in the midst of a brawl with his board, no reputable investor would be willing to give WeWork a few billion dollars. Instead, WeWork would likely just keep bleeding cash until it ran out. Neumann understood that if he fought, WeWork would go insolvent, rendering the vast majority of his potential fortune worthless.
The scenario could get darker still. Banks including JPMorgan had lent him $500 million tied to his stock—potentially giving them additional levers of power over Neumann. Perhaps they could require him to repay the loan. His eight homes and his string of surf instructors and other staff—everything could be in jeopardy.
On Sunday afternoon, Neumann trekked to midtown to see Jamie Dimon in JPMorgan’s Madison Avenue office. He was still considering what to do—whether to fight or go. Everything had crashed so quickly.
When Neumann arrived, Jen Berrent was already there. So were Stern and a handful of other members of WeWork’s legal and finance teams. Dimon had been waiting for him. WeWork’s IPO was supposed to put JPMorgan on the map among tech companies, but over the past several weeks Neumann had humiliated Dimon and his bankers.
Dimon was direct with him. “You’re your own worst enemy,” Dimon told him. JPMorgan couldn’t take the company public with him as CEO. The reasons were obvious. Investors wouldn’t buy the stock, and Neumann had become toxic as a leader. Dimon didn’t demand that Neumann leave his post, but explained why it was critical for the future of WeWork for him to do so.
The big question for Neumann and Dimon was whether Neumann was going to fight to keep control.
Dimon counseled Neumann to go quietly. The more gracefully he walked away, the better it would be for WeWork, he told him. And what was good for WeWork was good for Neumann—even if he wasn’t CEO. “Save your child. Save your baby,” Dimon said.
Neumann, defensively, protested to Dimon. He’d listened to everything the bank suggested, he said, and yet it still all fell apart.
That wasn’t true, Dimon told Neumann. “You listened to nothing.”
That night, Neumann walked into a restaurant near midtown to meet his three closest investors and advisers since he first took venture capital: Dunlevie, Eisenberg, and Langman.
As he sat down with Dunlevie and Eisenberg—Langman was running behind on a flight from London—the two investors made clear what had become obvious at that point: Neumann had lost their support. He had lost the whole board’s support. Dunlevie, normally unflappable and genial, was angry—upset with Neumann for letting WeWork go so far off the rails. He told him he needed to go. WeWork would go insolvent if he resisted; Neumann would be hounded by personal lenders and could lose everything, he told him.
By the time Langman arrived, Neumann seemed to have caved. He had little other choice. In the end, staying in power wasn’t rational. He didn’t want to lose everything. If he stepped aside, he could still be a billionaire. He seemed surprisingly sober about the decision, mostly focused on how he could restructure his own personal loans. Neumann asked the others for advice on that and what relationship he could have to the company going forward—exactly what he could still negotiate.
Dunlevie and Eisenberg headed to their hotels, while Langman headed home with Neumann to keep talking. They sent out an email to the other directors: a call with board members was set for the next morning.
Throughout the next day, Monday, and into Tuesday morning, Neumann’s friends and allies—including his co-founder McKelvey—filed into the carriage house in Gramercy Park. Adam Neumann had made his decision. And he was holding a living wake.
Rebekah Neumann came in and out. Despite the lingering bitterness toward her and her role, especially over the past several months, many in the room simply felt bad for her in the moment. She looked as if she hadn’t slept in weeks. She seemed as though she’d come down to earth—vulnerable. She was still asking why everyone was out to get them.
For those inside the carriage house, the mood was tense. It was a contrast with the climate at the company’s headquarters, where work had simply ground to a halt. The office was dominated by employees speculating on Slack or text messages as to what the future might hold. All anyone could do was read about WeWork in the news.
WeWork, meanwhile, needed some attention. Decisions had to be made. And fast. On Monday in a meeting at Steven Langman’s Rhône offices in midtown, the board met without Neumann and decided that Artie Minson and Sebastian Gunningham would take over as co-CEOs. Neumann was in favor of the decision and had prepared both for the move. Minson had the institutional knowledge and investor relationships, while Gunningham had experience with running operations at Amazon. Later that day, Neumann got to work on details—negotiating his deal with the board, the mechanics of giving up his role and his potent voting shares. He wanted to keep some control—to keep a strong hand over the board if he was going to step aside. The directors agreed he would stay on as chairman, and he would have three votes per share. The company began working on an announcement to the press.
On Tuesday morning, Neumann walked into one of the offices in his house by himself and called into the WeWork board meeting.
On the phone call, he stuck to his pledge to go gracefully, though he wanted to settle some scores. He’d begun to turn angry at Berrent, perhaps resenting her pushback against him in the IPO process. She should be stripped of her largely ceremonial title as president, he told the board, just left to be chief legal officer.
Eventually, there was a vote on his position as CEO. One by one each board member voted in favor of Neumann’s stepping down.
When it was Neumann’s time to vote, he simply voted alongside everyone else for his own ouster. He pledged to help the company in any way possible. After weeks of mounting tension, he went out not with a bang but a whimper.
Everything was buttoned up by Tuesday midday.
Word leaked out, and The Wall Street Journal and The New York Times posted stories on Neumann’s ouster, with news rapidly reverberating around the internet.
At 1:45 p.m., the official press release went out, titled “WeWork’s Board of Directors Announces Leadership Changes.”
“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction,” Neumann’s quotation in the release said. “I have decided that it is in the best interest of the company to step down as chief executive.”
Inside WeWork’s headquarters, Artie Minson and Sebastian Gunningham prepared to address the staff. They sent out a note to all employees, announcing that “Adam has decided to take on a new role as non-executive chairman.” They were the new CEOs, they said, warning of “difficult decisions ahead.”
At a meeting on WeWork’s fourth floor minutes later, the two looked out at rows of glum staffers gathered there to listen. It was a somber coronation—a dramatic departure from the high-energy all-hands meetings of old. Flanked by Michael Eisenberg and Mark Schwartz, Minson began talking.
“Today has been an interesting day,” he said. He apologized. For the IPO. For the drama. For the negative press attention that they’d probably been forced to explain to their family and friends for weeks. All of it.
Then he planted seeds of hope. “I believe in a comeback,” he told them. He’d been through near-death experiences at other companies, and they’d turned around to become successful companies. WeWork, too, was going to be a comeback story.
From the book THE CULT OF WE: WeWork, Adam Neumann, and the Great Startup Delusion by Eliot Brown and Maureen Farrell. Copyright © 2021 by Eliot Brown and MMF Creative Inc. Published by Crown, an imprint of Random House, a division of Penguin Random House LLC.