(Bloomberg Businessweek) -- Adam Neumann spent some of his final days as WeWork’s chief executive officer the same way he had for countless weekends in recent years: surrounded by family at his house in the Hamptons. With the company’s plan to go public smoldering, his control over the business dwindling and its biggest investor starting to turn against him, Neumann gathered his wife and business partner, Rebekah, and their five kids, piled into a car and drove east to the tony beach community.
As the Neumanns unplugged at sundown last Friday to observe the weekly Jewish ritual of Shabbat, SoftBank Group Corp.’s Masayoshi Son was preparing for an ouster. Son’s businesses had more than $10 billion riding on the company in the form of stock and loans. Over the course of a month, financial advisers to WeWork determined that the shares were worth about a quarter of the price SoftBank paid in January. The problem, Son reasoned, was Neumann.
WeWork long had the image of a family business: a husband-and-wife pair at the helm and company slogans about how life is “better together.” Although Adam Neumann started the business in 2010 with Miguel McKelvey, a kindred spirit who, like Adam, spent time on a commune during childhood, they rewrote the founding story over the years to include Rebekah. The three were listed as founders in registration documents for an initial public offering published last month. Rebekah, 41, was also chief brand and impact officer of the parent company We Co., CEO of an education arm of the business called WeGrow and one of three people assigned to select a replacement for her 40-year-old husband if he dies.
There were a lot of things about WeWork that made public investors recoil. For every $1 of revenue, it incurred about $2 in expenses and didn’t make a convincing case it could reverse that equation. It sought to be valued as a technology business but operated much like a real estate company. Its corporate structure looked like a schematic for a microwave.
And the Neumanns seemed to embody it all with a sense of arrogance, as one financial analyst put it. The IPO prospectus offered a litany of apparent conflicts of interest. Adam Neumann hired multiple family members besides his wife, including her brother-in-law, who also left the company this week. Neumann borrowed company money, collected rent from WeWork on space in buildings he owned and charged the company $5.9 million for the rights to a trademark he held on the name “We.” He had effective control of management decisions through stock with special voting rights, though it ultimately wouldn’t be enough to keep him in power.
This account of Adam and Rebekah Neumann’s nine-year reign and swift fall is based on interviews with seven current and former WeWork employees, advisers and investors, and multiple other people familiar with the company. SoftBank declined to comment, as did representatives for Neumann and WeWork, citing regulatory restrictions around a pending IPO.
After an initial onslaught of investor criticism in recent weeks, WeWork took steps to address many of these issues and lessen Neumann’s grip on the company, but he still held onto his job. Son, a 62-year-old Japanese billionaire known for his own eccentricities and mystical pronouncements, had been a giddy supporter of Neumann for years. This appeared to be the case as recently as last week, when SoftBank was anticipating Neumann’s attendance at its corporate retreat in Pasadena, California to deliver one of his corporate gospels. But after he postponed the IPO at the urging of SoftBank and other investors and advisers, he backed out of the speech, saying he might come on the last day of the conference, which was that Thursday. Ultimately, he didn't appear at the gathering at all.
On Sunday, Neumann returned from the Hamptons. The same day, SoftBank’s plan to remove him as CEO of the company became public. Son’s allies included Benchmark’s Bruce Dunlevie and John Zhao, founder and CEO of Chinese private equity firm Hony Capital, both members of the board. By Tuesday, Neumann relented. Before the board was ready to get on a conference call and vote, everyone knew the outcome, and Neumann voted with the rest of the members to oust himself. The decision was unanimous, according to a person familiar with the matter.
He resigned that day and agreed to cede his majority voting rights. Rebekah was out, too.
The Neumanns’ departure marks a seismic shift for WeWork and its culture, which was shaped by the idea that personal and professional life should be indistinguishable. This ethos is on display at the company’s co-working offices, where beer kegs are a fixture. And it’s reflected in the private elementary school within WeWork, which Rebekah said they built to give their children a worthy education, or the time Adam was seen visiting his kids at the school wearing nothing but an open robe and Speedo. (He was coming from the steam room attached to his office.)
In Neumann’s email to staff announcing his departure Tuesday, he suggested the mission hasn’t changed. “When Miguel, Rebekah and I founded WeWork in 2010, we set out to create a world where people work to make a life and not just a living,” Neumann wrote. “I could not be more inspired by everything we have achieved.”
In WeWork’s early days, the founding lore listed Adam Neumann and Miguel McKelvey as the sole creators. Around that time, Rebekah Neumann was acting in a handful of films, alongside stars such as Lucy Liu and Rosario Dawson. Rebekah, who descends from Hollywood royalty and is a cousin of Gwyneth Paltrow, wasn’t around the office much in those days, according to an early employee.
When she was there, Rebekah had strong opinions. She asked to change which color T-shirt employees would wear during move-in day for tenants at new offices. She also wanted to make one floor of an early WeWork headquarters a film production area, two former employees said, and the company built video editing stations and a screening room. Rebekah echoed her husband’s views on work-life balance. “We don’t have a line at all between work and life,” she told Fast Company in 2016. “It’s not even a blurred line. There is no line.”
Over time, Rebekah’s roles in the company took on greater importance. In 2014, WeWork began describing her publicly as chief brand officer. The next year, she became a founding partner and by 2016, a co-founder along with the two men. In the IPO prospectus, she’s listed second, behind Adam and ahead of McKelvey.
Professional life at WeWork frequently overlapped with the personal. Adam, a connoisseur of tequila, often partied with colleagues in WeWork offices, and in 2014, after an investment that granted him majority voting control of the company, he celebrated so hard that he broke a floor-to-ceiling window in his office, according to a person familiar with the incident. He called in WeWork maintenance workers to replace the glass overnight so it wouldn’t be visible in the morning, the person said.
WeWork also fostered family ties within its executive ranks. The company disclosed two connections in the IPO prospectus: One was Adam’s brother-in-law, who ran the company gym. It also said an immediate family member was paid to host eight live events for the company. And there were several more instances that weren’t disclosed in the filing. The chief product officer was Rebekah’s brother-in-law; the longtime head of real estate was Rebekah’s cousin; and for years, the company’s mega summer retreats were hosted at a venue in upstate New York owned by the cousin’s parents.
As Adam grew older, the partying didn’t stop, but he took more of an interest in his children’s education. In 2017, WeWork debuted WeGrow, whose mission statement is “to unleash every human’s superpowers.” Rebekah became WeGrow’s founder and CEO, saying she was inspired to build the school because she wasn’t happy with her oldest daughter’s experience in kindergarten. Students would be “raised as conscious global citizens of the world,” she said. For a yearly tuition of as much as $42,000 a year, children run around the modern, blond-wood floors, staff a vegetable stand and take music lessons, in addition to more academic endeavors. The location, on the third floor of the same building as WeWork’s headquarters in New York City, was designed by Bjarke Ingels Group, whose eponymous leader took a role as chief architect at WeWork last year. The school, which currently has around 100 students, was buoyed by WeWork’s resources: A significant number of students are the children of employees and more than half receive financial aid, though the Neumanns’ five children paid full price, according to two people familiar with the matter.
Adam had the role of fundraiser and visionary, and Rebekah was the driving force behind WeWork’s lofty corporate speak, three former employees said, embodied in the company’s mission to “elevate the world’s consciousness.” She made decisions quickly and had been known to make personnel choices or reassign WeWork staff based on their “energy” or if they said something she disapproved of. She was also devoted to her ideal of familial obligations. Onstage at WeWork’s annual company festival Summer Camp last year, she told an audience of 8,000 WeWork employees and customers that “a big part of being a woman is to help men manifest their calling in life.”
In 2018, Rebekah decided that WeGrow needed a chief operating officer and had her eye on Adam Braun, according to four people familiar with the matter. At the time, Braun was CEO of an education startup, MissionU, and the founder of a nonprofit, Pencils of Promise. His brother also happens to be Scooter Braun, the talent manager to Justin Bieber and nemesis of Taylor Swift. The Neumanns approached MissionU about an acquisition and pitched placing its education services in WeWork’s many campuses and offices, said two people familiar with the deal. Rebekah interviewed many of MissionU’s 25-person staff, but the interviews didn’t focus mainly on their qualifications. She asked each of them about their “superpower,” according to a former MissionU employee. (Adam Neumann apparently shares her curiosity: In an interview with Bloomberg Businessweek this year, he asked the reporter about her superpower. He added, “My superpower is change, and change is painful.”)
As the deal progressed, it seemed clear to MissionU staff that WeWork didn’t intend to integrate the business but simply wanted to hire Braun, the people said. Eventually, Braun joined WeGrow, as did another employee who left soon after. No one else from the startup was hired at the school, though three people joined WeWork. The company paid $4 million in stock for the acquisition, according to a person familiar with the deal. “Adam Neumann waltzed into my startup’s office 18 months ago under false pretenses to poach my co-founder,” Mike Adams, who started MissionU with Braun, in a now-deleted tweet on Tuesday. “Rebekah ‘didn’t like my energy’ so I wasn’t even offered a job.”
--With assistance from Peter Elstrom, Cathy Chan and Sarah McBride.
To contact the authors of this story: Ellen Huet in San Francisco at ehuet4@bloomberg.netGillian Tan in New York at gtan129@bloomberg.net
To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net, Anne VanderMeyAlistair Barr
For more articles like this, please visit us at bloomberg.com
©2019 Bloomberg L.P.
