WeWork CEO Adam Neumann Expected to Step Down

An announcement of the move could come as soon as today, the people said, assuming the decision isn’t reversed at the last minute.

Mr. Neumann’s position at the company became tenuous after We postponed an IPO earlier this month amid concerns from prospective investors about its governance and ability to reverse big losses. That skepticism has placed a major dent in the company’s expected valuation, which has plummeted from $47 billion earlier this year to as low as $15 billion.

Mr. Neumann will cede majority control of We, with his voting shares being reduced to 3-to-1 from 10-to-1, the people said.

The company plans to name two internal executives as Co-CEOs:

Artie Minson,

currently the company’s chief financial officer, and

Sebastian Gunningham,

a veteran of

Amazon.com
Inc.,

a person familiar with the decision said.

Further undercutting his position: eccentric behavior that was detailed in a Wall Street Journal article last week, including a party-heavy lifestyle that included marijuana use in an airplane and unpredictable management decisions.

Mr. Neumann has been in meetings with

JPMorgan

Chase & Co. Chief Executive

James Dimon

at the bank’s headquarters throughout this week and separately met with WeWork director

Bruce Dunlevie

Sunday to discuss his fate, the people said.

JPMorgan is the Wall Street firm that’s closest to We, as the WeWork parent is officially known, serving as investor, lead underwriter for the planned IPO and a lender to the company and Mr. Neumann personally. Mr. Dunlevie is general partner of venture-capital firm Benchmark, We’s second-largest outside shareholder.

The situation is delicate because Mr. Neumann controls the nine-year-old company and its board, which he could summarily dismiss if he wanted.

But pressure on Mr. Neumann from

SoftBank Group
Corp.

appears to have marked a major turning point. The Japanese technology conglomerate is among those pushing for his ouster, the Journal first reported Sunday. In addition to being We’s biggest shareholder, SoftBank has influence by virtue of its willingness to pump much-needed cash into the company. SoftBank was expected to contribute as much as a third of the $3 billion or so of IPO proceeds. Without its support, there would have been few other places for We to look for the multiple billions of dollars it needs to keep growing at its present pace.

The change in tune from SoftBank and others was also surprising because existing investors have long known about some of the concerns raised in the past few weeks. We’s board of directors approved deals between the company and Mr. Neumann like the leases with his properties, as well as other eyebrow-raising big-ticket items like the more than $60 million private jet used by Mr. Neumann, people familiar with the matter have said. His penchant for tequila and partying has long been well known.

It has been a rapid turn of events for Mr. Neumann and We, which a little more than a month ago was the country’s most valuable startup with high hopes of a successful public offering. But soon after it unveiled its IPO filing in mid-August, criticism and concerns began piling up.

Potential investors balked at the company’s prior valuation of $47 billion as they focused on losses that totaled more than $1.6 billion last year and a long list of unusual deals between Mr. Neumann and the company. We slashed its expected valuation by roughly two thirds, erasing $30 billion or more.

Key to the valuation drop was a view of many potential investors that We was a fast-growing office leasing company with large losses, rather than the tech-like “physical social network” that Mr. Neumann had long pitched it as. We leases office space on a long-term basis, renovates it to make it hip and inviting, and subleases it shorter-term.

The fate of the IPO now remains to be seen. The company said when it was postponed that the offering would take place by year-end, but people familiar with the matter now say that with a new CEO coming in, a further delay may be necessary.

Write to Eliot Brown at [email protected], Dana Cimilluca at [email protected], David Benoit at [email protected] and Maureen Farrell at [email protected]