WeWork Restructures IPO Filing to Limit CEO Adam Neumann

WeWork’s valuation target continues to fall: now below $15 billion and on its way to perhaps rest as low as $10 billion.  At the same time, WeWork’s private valuation has been rated, at least t one point, as high as $47 billion. 

The surprising drop comes as the firm’s parent company made an announcement, at the end of the week, it is planning to make a handful of changes to its corporate governance structure.  The goal, of course, is to set this foundation before launching its highly-anticipated IPO. And, of course, this is also happening at a time when investing concern is also on the rise. 

Indeed, The We Co amended its original S-1 filing, to change its high-vote stock from 20 votes to only 10 votes per share. This will, effectively, shorten WeWork CEO Adam Neumann’s voting power.  Before making this move, Neumann had major control of the company’s voting rights: through his Class B and Class C shares, with both of these carrying 20 votes per share (compared with one vote per share of Class A stock).  

In addition to this, The We Company also went so far as to cut out a key provision that would have allowed for Neumann’s wife, Rebecca, to head up the search for his replacement (should the need arise, whether by disability or death or other means). Instead, though, the WeWork board will now be in charge of choosing this successor.  As a matter of fact, the new filing now states “no members of Adam’s family will sit on our board.”

This new filing also addresses company concerns of Mr. Neumann’s control of the company as well as recent sales of stock.  For example, Neumann previously controlled the majority of WeWork’s voting rights and then raised $700 million by selling—and, more importantly, borrowing against his—company stocks.  In fact, Neumann charged the company almost $6 million to use the “We” trademark.  On top of this, he also owns—either in part or full—several companies who lease four WeWork properties. This has the obvious potential to be a major conflict of interest (since he is technically both the landlord and the tenant).  This arrangement, alone, generates several million dollars. 

At the end of the day, Neumann agreed to limit the amount of stock he can sell in year two and three of the IPO, at an equivalent of no more than 10 percent of his present shareholdings.