The WeWork train wreck keeps on going as the company prepares to cut thousands of jobs. The only problem? There’s not enough money left to pay employee severance packages.
WeWork literally can’t afford to let people go. Meanwhile, founder Adam Neumann is set to walk away with a $200 million payday under a rescue package by Softbank.
Softbank, one of the lead investors in WeWork, is expected to announce a $5 billion rescue deal today. The package includes $200 million for Neumann to give up his voting shares.
Neumann extracts $200mm so WeWork can raise the funds to begin laying off thousands.
— Scott Galloway (@profgalloway) October 22, 2019
The rise and fall of WeWork
As SoftBank steps in to bail out WeWork, the company’s valuation has plunged. Just weeks ago, the unicorn startup was valued at $47 billion. Now it’s $7.5 billion.
The company was readying an IPO with JP Morgan leading the charge. Employees with stock options watched the company’s valuation soar to dizzy heights. Weeks later, they face the guillotine with no money left for a severance package.
As Bloomberg editor and anchor Joe Weisenthal wrote:
“It’s crazy to think of the number of WeWork employees who, a few months ago, thought they were on the verge of becoming millionaires. Fortuna’s wheel turns again.”
It's crazy to think of the number of WeWork employees who, a few months ago, thought they were on the verge of becoming millionaires. Fortuna's wheel turns again. pic.twitter.com/IOT24lepMw
— Joe Weisenthal (@TheStalwart) October 21, 2019
A leaked memo from WeWork’s co-CEOs confirmed that layoffs are on the horizon.
“As part of refocusing around our core business, we are strategically reorganizing our operating model with the goal of creating a leaner, more efficient organization. As we have mentioned, this will result in a smaller, global workforce … While we cannot commit to an exact timeline, we expect this exercise to roll out largely by function and over the coming weeks.”
Adam Neumann to walk away with $200 million
While employees are left in limbo, eccentric co-founder Adam Neumann is expected to walk away with $200 million.
Neumann resigned in recent weeks but still controls 20% through shares and voting rights. The SoftBank rescue package aims to wrestle voting rights back from Neumann in exchange for a $200 million handshake.
“As co-founder of WeWork, I am so proud of this team and the incredible company that we have built over the last decade… 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’s resignation speech.
Neumann’s hubris has arguably led to WeWork’s downfall. He mismanaged company finances, including renting his own real estate to the company and using his own stock as collateral in personal loans.
Now those mistakes are hitting the company, investors, and employees hard while Neumann walks away with $200 million in his pocket.