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©2021 by the Kellogg School of Management at Northwestern University. This case was prepared by Professor Sarit Markovich and Evan Meagher ’09. Cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Some details might have been fictionalized for pedagogical purposes. To order copies or request permission to reproduce materials, call 800-545-7685 (or 617-783-7600 outside the United States or Canada) or e-mail custserv@hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Kellogg Case Publishing.

S A R I T M A R K O V I C H A N D E V A N M E A G H E R

The Harder We Fall: The We Company’s 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers IPO Fiasco

“How did you go bankrupt?” Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.”

—Ernest Hemingway, The Sun Also Rises

WeWork cofounder Adam Neumann burst onto the stage at Madison Square Garden in January 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. Before him sat nearly 7,000 employees of the rapidly growing coworking space landlord, which offered shared and short-term office space and services mostly for startups and freelancers. This number was an impressive increase from the company’s 4,000 employees just one year ago. Swaggering with the confidence of a rock star and the Zen spirituality of a yoga guru, Neumann quieted the crowd before launching into a passionate speech extolling the company’s accomplishments during 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online. The vaunted “unicorn” startup* had actually accelerated its growth rate in total membership, workstations, and revenues, which had soared to $1.82 billion. With his wife, Rebekah, serving as WeWork’s chief brand officer, Neumann had led the company’s diversification into adjacent product lines WeGrow (an innovative private elementary school startup), WeLive (a communal living service), and Powered by We (a design, renovation, and office-management service). 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers would bring more of the same, he promised as employees rose to their feet, cheering.

* A term coined in 2013 by venture capitalist Aileen Lee of Cowboy Ventures. Unicorns are startups with a post- money valuation above $1 billion.

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“And I’m happy to announce that our most recent fundraise has been a complete success. . . and values our little company at $47 billion!” The crowd roared, but again, Neumann quieted them.

“I got this call, and it’s a good thing,” he continued, turning contemplative. “It could be a blessing. We raised a smaller amount, kept our investor base intact . . . It’s a change in strategy, but change . . . teaches you. It teaches you lessons. It’s a good thing.”1

“He literally said, ‘Our valuation is based on energy,’ and everybody just said, ‘OK, whatever,” a senior WeWork employee recalled later. “We went along with it. The way everything came together, from his energy, to his vision, to how people-oriented it was, the camaraderie. We banded together, and it was fun. You know, ‘band of brothers, we’re in the trenches together, the adversity and two-minute miles.’ I give a lot of credit to WeWork. It had Uber’s aggressiveness but Lyft’s heart.”

But just nine months later, the company was backing off its IPO, and Neumann had been forcibly ejected from the company amid scathing public critiques of his greed and egotism.

WeWork In early 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers, Israeli entrepreneur Adam Neumann found himself running a struggling baby-

apparel company out of an office at 68 Jay Street in Brooklyn, New York. Called Krawlers, the business focused on selling onesies with padded knees to parents with crawling babies.2 “We were working in the same building as my co-founder Miguel McKelvey, a lead architect at a small firm. At the time, I was misguided and putting my energy into all the wrong places,” Neuman recalled years later in an interview with a business publication.3 Recognizing an opportunity in the vacant space in the building, the two teamed up as co-founders of an incubator they called GreenDesk, offering environmentally friendly coworking spaces with recycled furniture and sustainably generated electricity.4 The business took off as GreenDesk rented space from the building’s owner Joshua Guttman and subleased it at a premium to startups and freelancers. In 2009, Neumann and McKelvey sold GreenDesk to Guttman, earning “a few million” in the process, and launched a more ambitious version of the same basic business model—this time, without having to share any profit with Guttman—as WeWork in 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer.5 The pair raised $15 million—at a $45 million post- money valuation—from local real estate developer Joel Schreiber. “I didn’t negotiate; I said yes. I loved Adam’s energy,” Schreiber said later.6

WeWork thrived, arguably by selling a more polished, more aggressively promissory version of the standard coworking space model. Whereas most coworking competitors, such as Regus, Impact Hub, and Industrious, followed a similar strategy of leasing large office buildings and subleasing out smaller portions for a premium, WeWork’s marketing materials sold a vision of collaboration between diverse, creative urban professionals. WeWork spaces featured beer and kombucha on tap, frequent social gatherings among tenants, and foosball and ping pong tables. “We are changing the way people work,” Neumann said in 2013. “It just happens to be that we need space to do it in.”7 WeWork commanded premium prices from sublessors—structured not as a lease payment but as a ‘membership fee’—by promising an environment of collaborative innovation wherein D o

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a member company needing freelance design help could meet a potential such contractor over regularly scheduled happy hours, bagel brunches, or yoga classes. As part of the membership fee, WeWork also bundled in services like security, reception, high-speed internet, and printing.

But the real perk is having other people around. WeWorkers network at weekly bagel-and- mimosa parties, where they might find a software developer to produce an app for them. Members pitch their ideas at informal demo days and get free advice during office hours from willing outside partners like ad agency Wieden+Kennedy. Handshake agreements and job referrals are made over the wagging tails of members’ dogs.

“Other offices are just depressing compared to here,” says Nicole Halmi of Neon, an image- selection platform in the WeWork Tenderloin location in San Francisco. “The old model of office space is dead,” adds startup veteran Gary Mendel, who runs Yopine from a WeWork in the renovated Wonder Bread factory in Washington, D.C.8

The company offered a variety of pricing plans to accommodate everyone from solo proprietors needing only WiFi and coffee to so-called “enterprise” customers (those with more than 500 employees worldwide) who needed full-scale-miniature offices as the first step in national or international expansion. As of March 2020, the most basic membership cost only $45 per month and included access to WeWork offices in 845 open or coming-soon locations in 188 cities worldwide. It also featured access to WeWork’s social network, WeWork Commons, which enabled entrepreneurs to interact and exchange ideas. Actual use of the facilities cost an additional $50 per day, however, so it was best suited to those who were interested primarily in networking and who needed office space only occasionally.9

Additionally, WeWork’s sudden massive global reach purported to offer those larger enterprise customers—which made up approximately 43% of the company’s membership base—a great deal of flexibility in short-to-medium term leasing options overseas. Many countries required the formation of a local, tax-paying entity to execute a commercial lease, a process that often proved prohibitively expensive given the legal and tax costs of foreign entity formation. With WeWork leasing out spaces around the globe, larger companies could simply sublease space from WeWork, bypassing or delaying many of the regulatory frictions traditionally associated with foreign expansion.

To support the community vision, WeWork offered a networking application, The WeWork Member Network, which it described as “a private, professional, social network for our members to access the global community, as well as the perks and features of their membership. It’s the best place to solve business problems, find clients, and connect with other members.”10

Coworking Industry Overview In its S-1 form, dated August 14, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, WeWork—freshly renamed the We Company—

estimated a total coworking industry addressable market size of between $945 billion and $3 trillion. This market was spread across the 280 global target cities the company had identified (111 of which it already served, as of June 1, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, with plans to expand into 169 more).11 At the D o

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time, the We Company estimated it had less than 1 percent market share in what it described as a highly fragmented industry, with both individual and institutional players fulfilling the basic value proposition of leasing out office buildings and then subleasing portions thereof at a premium that, to justify its cost, often included value-added services such as security, high-quality internet, and advice on fundraising proposals.

The dominant player prior to WeWork’s meteoric growth was IWG (née Regus), founded in 1989 by Mark Dixon, an executive who had grown tired of working out of hotel conference rooms. By WeWork’s reckoning, IWG had less than 3.5% market share, with its 1,284 locations producing revenues of $3.2 billion in 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.12 (The vast majority of these locations were in the United States, its largest and most mature market in 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, which also trailed only EMEA as its second-fastest-growing market).13 As WeWork flourished, other players began to enter the marketplace and hold themselves out as WeWork alternatives, including traditional landlords and developers like Boston Properties and Tishman Speyer. “I think a lot of landlords will step in to manage the space if WeWork exits,” said Daniel Lisser, senior director at real-estate brokerage Marcus & Millichap Capital Corporation, in a 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers interview with an industry publication. “They will try to be WeWork without the drama.”14

The growth of the gig economy provided a tailwind to the industry’s 46% compound annual growth rate during the decade of WeWork’s ascendance. Freelancers, part-time employees, and entrepreneurs flocked to coworking spaces and paid premium prices for low-commitment spaces that offloaded the burden of office management and maintenance to the coworking space provider (see Exhibit 1).

Leasing and Locations WeWork initially acquired the office space it leased out to members by signing long-term

leases with terms as long as ten or fifteen years. As it grew, the company shifted from leases to co- management arrangements, in which WeWork’s landlord would make a financial concession or contribution to the buildout or operating costs in exchange for a share of membership revenues or profits. (The company found the most success with this approach in softer markets, often overseas, as the pricing in hypercompetitive markets such as San Francisco or Tokyo made such arrangements more difficult to arrange.) As WeWork grew, it found it easier to get landlords to share some of the buildout costs. In addition, the We Company set up a real estate investment fund called ARK to begin purchasing properties outright, with long-term mortgages financing the acquisition.

The company chose new locations based on their proximity to facilities and businesses like coffee shops, restaurants, and gyms. Once it had secured a location, WeWork designed that site to maximize space usage, minimizing square footage per person while still providing ample common spaces and meeting rooms. According to the company, its use of data from other offices allowed it to predict meeting room usage better and thereby to design their new offices more effectively.15 Compared with the 250-square-foot space per person in commercial offices industry-wide, WeWork’s buildings offered an average of 50 square feet per person.D o

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WeWork’s buildouts of new spaces on average were completed in nine months, although some buildings were ready in as little as four months. According to data analytics firm CB Insights, WeWork’s efficiency in construction and design, together with its buying power, lowered the company’s cost of adding a new desk to $9,504 in September 2017, from $14,144 the year before.16

Growth and Expansion WeWork’s geographic growth also scaled the services it offered its members through acquisitions

and partnerships. For example, WeWork’s store offered members discounts on software and office services. The company’s acquisition of the Flatiron School, a coding boot camp, allowed WeWork to offer members coding courses and programs, and a partnership with online personal finance company SoFi offered WeWork members in the United States a 0.125% rate discount on student loans. All of these incentives were part of the company’s vision of building a WeWork ecosystem.

The company’s ambitious brand promise was matched only by Neumann’s ability to fundraise. By 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay, the company’s roster of investors included J.P. Morgan Chase & Co, T. Rowe Price Associates, Wellington Management, Goldman Sachs Group, the Ace my homework – Write my essay – Harvard Corporation, Benchmark Capital, and Mortimer Zuckerman, former CEO of Boston Properties—all of whom were drawn to WeWork’s promise of creating a network that enabled entrepreneurs within as well as across locations to interact, exchange ideas, and collaborate.17 WeWork had joined the ranks of the unicorns with its November 2013 Series C, but the company’s future changed forever when Neumann met Masayoshi Son, the founder and CEO of Japanese financial services conglomerate SoftBank.

Masayoshi Son and the Vision Fund Born the son of Korean immigrants on the Japanese island of Kyushu in 1957, Son studied

computer science and economics at the University of California Berkeley. Before turning 21, Son had already experienced entrepreneurial success, selling a translator to Sharp for approximately $1 million. A few years later, he founded SoftBank, originally a computer parts store that quickly diversified into publishing, trade shows, and software. Son took the company public in 1994 at a valuation of $3 billion and became a holding company in 1999, with a focus on venture capital investing during the go-go late 1990s technology boom. In 2000, Son led an investment into a Chinese startup named Alibaba; by the time Alibaba went public in 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay, SoftBank’s $20 million investment was worth over $60 billion, a more than 300,000% return.18

That extraordinary success prompted Son’s most ambitious move to date: the May 2017 launch of the $100 billion Vision Fund. The sheer size of the fund seemed, to many venture market observers, to turn the traditional venture capital model on its head, as it takes time to put billions and billions of dollars of capital to work. Son chose a different approach: He selected what he considered to be the most likely winners in large and growing markets, and he persuaded their CEOs to move faster, think bigger, and deploy more SoftBank-funded dollars to reach escape velocity in their vertical. He referred to this strategy as gun-senryaku, Japanese for a flock of birds flying in formation.19D o

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The Vision Fund’s impact on the venture market was profound and immediate; by October 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, it had single-handedly deployed more than 10% of total global VC dollars that year (see Exhibit 2). The Fund deployed more than $7 billion into high-flying ridesharing application Uber in 2017, about as much as the total target of competitor Sequoia Capital.20 Because it takes roughly the same amount of time and effort to perform due diligence on a $20 million investment as it does on a $200 million or $2 billion investment, Son prioritized massive bets on companies that by definition were already or would become unicorns upon closing an investment from the Vision Fund. “It’s really altering the structure of venture pretty fundamentally,” Trinity Ventures general partner Patricia Nakache said in 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online. “I feel like over the past three years, the venture environment had bifurcated into this world of ‘haves’ and ‘have nots,’ where there are some companies that have struggled to raise money and some companies that have been able to raise gobs of money.”21 Those so-called “mega-rounds” often included secondary portions, wherein founders and employees could sell shares they had acquired via exercising low-priced employee options. This allowed founders to get liquidity for their ownership without the burden of going public, incentivizing them to remain private and therefore to avoid the public markets’ more rigorous reporting requirements. It also prompted an increase in M&A activity, as companies with overflowing war chests pursued growth at any price, often choosing to grow through acquisitions rather than organically. WeWork was no stranger to this strategy, acquiring more than 20 companies from 2017 to 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers (see Exhibit 3). Only slightly more than half of those related to WeWork’s core business proposition, a trend that grew even more pronounced after SoftBank’s first investment into the company.

Son and Neumann first met at an event called Startup India in January 2016: 2024 – Do my homework – Help write my assignment online; Neumann had agreed to speak at the event in exchange for an opportunity to speak with Prime Minister Narendra Modi to discuss WeWork’s expansion into the country. Son and Neumann dined together that night, but Son passed on a $750 million financing round two months later, which was instead led by Chinese venture capital firm Hony Capital. By December, however, Son had reached back out to Neumann to schedule a tour of WeWork’s headquarters in Manhattan. Son arrived hours late and said he had just 12 minutes to hear the WeWork story. The two continued the frantic conversation in the back seat of Son’s ride to the airport, during which Son sketched out the terms for a $4.4 billion Series G investment that would value the company at over $21 billion. With the extraordinary sums of capital came extraordinary expectations; Son compared meeting Neumann to the feeling he got meeting Jack Ma, the founder of Alibaba, with the clear implication that Neumann would be expected to deliver similar returns.22 The pressure for growth increased exponentially, with employees reporting that Son’s insistence on accelerating growth made Neumann more impetuous. One executive recalled the WeWork founder returning from a meeting with Son, upset because Son had told him that he wasn’t growing the company quickly enough.23

“[Son] believed that nine women could make a baby in one month,” the senior WeWork employee said later. “‘Amazon took 15 years? Let’s do it in five.’ But building great businesses takes time. It’s a process. It’s an evolution. And of all the people in the world, to tell that to [Neumann] was going to produce a supercharged outcome. [Neumann] was always talking about ‘growth, growth, growth’—so giving him a billion dollars, and asking him to go even faster had massive downstream effects on incentives and behavior, all the way down to the most junior employee.”24D o

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“That’s When Things Got Shaky” By the end of 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, WeWork was the toast of Silicon Valley. At Son’s urging, Neumann had

repositioned WeWork as a technology platform, noting the vastly richer revenue multiples that technology companies receive from public markets than do real estate companies. Neumann promised, for example, to outfit WeWork floors with sensors that could monetize analysis of tenant activity using artificial intelligence. WeWork then began expanding its offerings, acquiring companies and opening new businesses that spanned a variety of industries and markets. It established Rise by We, a luxury gym offering in a Manhattan-based WeWork space; WeGrow, a private elementary school led by Rebekah Neumann; and WeLive, a co-living business that attempted to replicate WeWork’s success in commercial real estate with a similar turnkey product for communal residences.

Meanwhile, Neumann’s free-spending ways became infamous within the company. He overcame mild pushback from the board to purchase a top-of-the-line Gulfstream G650ER private jet for $63 million and insisted on first-class office space in the newly opened Salesforce Tower for WeWork’s San Francisco office. Costs for the buildout exceeded $550 a square foot, which was about three times the amount WeWork usually spent renovating an office.25 (By late 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, it had surpassed $800.)26 Employees reported that they would receive Neumann’s mantra from the early days of WeWork—‘Activate the Space,’ which once meant throw a party so the coworking space would look lively while Neumann pitched early investors—and suddenly the office would be completely revamped. “The next day, one office is painted pink, and it has a $3,000 sofa in it, and everyone just knew, ‘Oh, that’s going to be Rebekah’s office.’ And she would be there for like two days,” the senior WeWork employee recalled.27

To maintain that pace of spending, Son and Neumann had agreed to structure a $20 billion buyout of all of WeWork’s early investors, granting SoftBank majority control over the company and allowing WeWork to grow while avoiding the regulatory scrutiny that an IPO would entail. Much of it would hinge on the blessing of Mohammad bin Salman, the crown prince of Saudi Arabia, who, with $45 billion, was the Vision Fund’s largest backer. The revelation, on October 3, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, that the Saudi Arabian dissident and Washington Post reporter Jamal Khashoggi had been murdered in the Saudi consulate in Istanbul put the deal on hold; the crime was almost immediately traced back to bin Salman, creating a public relations nightmare for the Vision Fund. Soon afterward, SoftBank’s stock fell by more than 20%, or approximately $20 billion in value. “We want to see those responsible [for Khashoggi’s murder] held accountable,” Son said during SoftBank’s quarterly earnings call a month later. “But at the same time, we have also accepted responsibility to the people of Saudi Arabia, an obligation we take quite seriously, to help them manage their financial resources and diversify their economy.”28

SoftBank suffered another setback in December when its Japanese mobile phone division held its initial public offering during a disruptive week in the public markets. It immediately cracked its IPO price while falling 15% on the first day, setting a record as the worst first day of trading in Japanese history.29 The one-two punch of the stock-price tumble and the busted IPO provided just enough of a headwind to the proposed buyout to allow a longstanding issue to scuttle the now tenuous deal: voting power. If WeWork’s IPO went through, Neumann would maintain D o

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supermajority control over WeWork by making his Class B and Class C shares enjoy 20 votes to every one vote for his investors. “That’s when things got shaky.30 There was some bad luck—the Nikkei took a huge hit, and the Saudis refused to re-up,” the senior WeWork employee said. “They were already $8 billion into the company, and [Neumann] wanted his 20-to-1 voting rights, so between the voting issue, the Nikkei tanking, and the crazy valuation, it just fell apart. It was supposed to be like $16 billion on $46 [billion]. But it turned out to be like $1 billion on $46, and it all came from the balance sheet of SoftBank, because the Vision Fund had bailed.31

“I have no idea how they got to $47 billion,” the senior WeWork employee continued. “They probably had some rhyme or reason, but there was a lot of hope and faith. Every time you fundraise, you ask yourself how much runway that bought you. When we raised the $4.4 billion, that bought us two years, but to get to the next milestone valuation point, it was going to take us four years. But you’ve only got two years of runway! We were kicking the can down the road. So, let’s load up the tank, raise more money, but by the way, now you’re burning even faster so if you raise $3 billion that’s only eight months of runway you raised, and now to get to the next valuation milestone, you’re seven years out. How are you going to close that gap?”32

Things Fall Apart With WeWork’s revenue growth outpaced only by its losses—it had lost $1.9 billion in 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online

on revenue of just $1.8 billion (see Exhibit 4)—the company needed greater and greater cash infusions to keep afloat. When Son called Neumann on Christmas Eve 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online to let him know the $20 billion buyout would not be going through, it only left one potential source of those infusions: the public markets. Four days later, Neumann filed documents registering WeWork for an IPO, finally filing its S-1, in August 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers.

Even by Wall Street standards, the market reaction was savage.

Critics lampooned the document’s pretentiousness and its idolatry of Neumann, who was mentioned 169 times. In a scathing retort entitled WeWTF, published two days after the prospectus’ release, Professor Scott Galloway of NYU’s Stern School of Business pointed out that the average unicorn filing document referred to founders only 25 times.33 The S-1 featured a “dedication”—unusual for what is typically a dry legal and financial document—that stated, “We dedicate this to the power of We—greater than any one of us, but inside each of us” and that the company’s mission was “to elevate the world’s consciousness.”34 Further testing investor patience, WeWork’s financial performance was reported as using internally created non-GAAP metrics, such as “community-based EBITDA (earnings before interest, taxes, depreciation, and amortization),” “ARPM (annual average membership and service revenue per physical member),” and “adjusted EBITDA before growth investments.”35

Further criticism was drawn from the governance and related party transactions section of the document, wherein WeWork revealed that in addition to Rebekah, several of Neumann’s immediate family worked for the company. The board of directors had also lent Neumann funds with which he purchased, in his own name, stakes in ten buildings, four of which he then leased back to WeWork at a profit.36 In three of these transactions, WeWork had signed a lease with D o

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Neumann on the same day that he had purchased his stake in the buildings, increasing the market’s skepticism that these had occurred as arms-length, market-price transactions.

Lastly, the company’s name itself became a sign of the self-dealing rampant in the company’s culture. To rebrand itself as the We Company, in early 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, WeWork had to acquire the trademark to “We,” which was owned by We Holdings LLC and which “manage[d] some of the founders’ stock and other assets.” In effect, Neumann had trademarked the word “We,” transferred it to an LLC under his control, and then sold it to the We Company for $5.9 million worth of shares in the We Company.37 The company later reversed the transaction amid investor outcry.38

A media feeding frenzy ensued, as nervous bankers—who had pitched WeWork on a valuation between $63 billion and 96 billion in the IPO just months earlier—began to walk back the proposed pricing in the face of public market uninterest in paying 24 times revenue for a cash- burning startup. Governance played a huge part, as Amy Borrus, deputy director of the Council of Institutional Investors, pointed out. “When you’re visiting with potential investors, and they raise all these questions, that’s where the rubber hits the road. It turns out a lot of investors had pointed questions as to how the company was structured, how [Neumann] ran the company, as well as the economic outlook for the company,” Borrus said in an interview in late 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers.39 In addition to Neumann’s 20x voting rights if the IPO went through, investors questioned the CEO succession plan in the event of Neumann’s passing or inability to perform his duties. WeWork’s bylaws provided for the creation of a three-member succession committee consisting of Rebekah Neumann and current board members Bruce Dunlevie and Steven Langman. If neither Dunlevie nor Langman were serving as directors at the time, Rebekah would choose one or two board members who were serving at the time to sit on the selection committee with her.40

With public investor appetite for the IPO in freefall, bankers kept revising the pricing range downward, until announcing they would delay the roadshow on September 16. Company spokespeople referred to the claim made in the S-1 that although WeWork had prioritized topline revenue growth above profitability, it could simply dial back on growth if it felt an impetus to reach profitability sooner rather than later.* Market observers questioned this level of control but noted that delaying the IPO would give WeWork management an opportunity to prove it. “One nice thing about postponing the IPO is that you get to find out,” Matt Levine wrote in his Money Stuff column on Bloomberg. “Missing out on the $10 billion of public money would slow down WeWork’s growth plans, but if WeWork is right, then there is just a dial that it can turn between “Growth” and “Profit,” and dialing down the growth automatically dials up the profits. If you are confident that you possess this dial and that it works this way, then delaying the IPO is a no- brainer: Sure, you delay your positive-expected-value growth, but you get to keep ownership of a good lucrative business rather than selling it too cheap. On the other hand, if the dial turns out not to work, then you’ll end up wishing you’d sold it cheap.”41

* The S-1 stated: “If we stopped investing in our growth and instead allowed our existing pipeline of locations to mature, we would no longer incur capital investments to build out new spaces or the initial expenses associated with driving member acquisition at new locations. Rather, we expect that each mature location would generate a recurring stream of revenues, contribution margin and cash flows. We believe that the flexibility to manage our growth by focusing on our existing pipeline of locations and allowing them to mature presents us with an opportunity to manage our profitability profile.”D o

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Two days later, on September 18, the Wall Street Journal published an article about Neumann’s management style that detailed his smoking of marijuana on the company jet, his heavy tequila consumption at work, and his egomaniacal aspirations to become the world’s first trillionaire, “president of the world,” and immortal being.42 This scandalous account put WeWork’s board of directors in a challenging position. Neumann still controlled a supermajority of WeWork; even as CFO Artie Minson and investor Michael Eisenberg held a conference call with the board on Sunday, September 22, arguing that Neumann would have to step down, Neumann declared “I’m never not going to be CEO.”43 Critics pointed out the irony that if the board terminated him, Neumann would have sufficient voting rights, if the IPO was successful, simply to terminate the board and re-hire himself.44

Complicating matters still further, the board’s financial indulgence of Neumann over the years—through the loans that allowed him to exercise stock options and those that allowed him to purchase buildings and lease them back to the company, as well as permitting his participation in secondary components of financing rounds—meant that the group had even less leverage than a typical board might in such a scenario. Such secondary pieces, once rare in venture capital circles, had grown increasingly common throughout the decade, as companies remained private longer, and enormous funds of indulgent private investors (SoftBank foremost among them) had demonstrated their willingness to provide early employees and founders liquidity prior to exit through acquisition or IPO. The Wall Street Journal had revealed in July that Neumann had already monetized his interest in more than $700 million in WeWork stock through such transactions over the previous few years. Already fabulously wealthy, with six homes located in Manhattan, Westchester County, the Hamptons, and San Francisco, Neumann faced little incentive to cooperate with the board.

“It was a game of chicken,” the senior WeWork employee later recounted, noting that SoftBank had been the only investor in the company since 2016: 2024 – Do my homework – Help write my assignment online. “He had already taken $700 million off the table. ‘Hey, Masa . . . what if I don’t [step down]?’ WeWork used to be 4% of [Son]’s portfolio, but it became 100% of [Son]’s reputation.”45

Ultimately, SoftBank blinked, although not without forcing Neumann out of the company. The negotiation played out over three weeks in late September and early October. Neumann resigned on September 24, pressured largely by a $500 million loan extended to him by JP Morgan, which had both invested in the company and served as lead banker on its failed IPO. The personal loan had been collateralized by his shares in WeWork, and because he had borrowed against them at a much higher valuation, Neumann found himself at risk of being in technical default. (His resignation as CEO also placed Neumann in technical default, triggering immediate repayment; JP Morgan agreed to give him 45 days to resolve the situation.) In mid-October, SoftBank won a bidding war with JP Morgan Chase & Co. for a rescue offer that valued WeWork at approximately $8 billion, some 20% lower than its 2015 – Research Paper Writing Help Service Series E round (see Exhibit 5). The transaction granted Neumann the right to sell $970 million in shares (approximately one-third of his remaining stake at that point), extended him a $500 million loan from SoftBank to repay the JP Morgan loan, and paid him a $185 million consulting fee. SoftBank’s Marcelo Claure replaced Neumann as chairman of the board, effectively severing all ties between the founder and the company.46 The company laid off more than 2,400 employees—over one-quarter of the workforce—and began D o

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divesting the investments Neumann had made in companies he found personally interesting, such as $13.8 million in a Spanish artificial-wave pool company and participation in a $32 million financing round for surfer star Laird Hamilton’s “superfood” coffee creamer company.47

Meanwhile, market observers (and thousands of laid-off WeWork employees) made Neumann a poster-child for twenty-first century greed,48 even as he reportedly began to refer to himself to friends as a “martyr” and to suggest that his lavish exit package served as proof of the good job he had performed as WeWork’s CEO.49 Matt Levine of Bloomberg was less complimentary: “It is one thing to build a successful company that creates a lot of value and take some of that value for yourself; Neumann created a company that destroyed value at a blistering pace and nonetheless extracted a billion dollars for himself. He lit $10 billion of SoftBank’s money on fire and then went back to them and demanded a 10% commission. What an absolute legend.”50

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Exhibit 1: Growth in Global Coworking Spaces, 2005–2020

3 30 75 160 310 600 1,130

2,070 3,400

5,780

8,900

12,100

15,500

18,700

22,400

26,300

–

5,000

10,000

15,000

20,000

25,000

30,000

2005 2006 – Write a paper; Professional research paper writing service – Best essay writers 2007 2008 – Affordable Custom Essay Writing Service | Write My Essay from Pro Writers 2009 2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 2011 2014: 2024 – Essay Writing Service. Custom Essay Services Cheap 2013 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay 2015 – Research Paper Writing Help Service 2016: 2024 – Do my homework – Help write my assignment online 2017 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers 2020

Source: “Coworking Spaces,” Statista, accessed December 10, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.statista.com/study/35480/coworking-spaces-statista- dossier.

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Exhibit 2: SoftBank’s Growing Share of the Global VC Market

Source: Jason D. Rowley, “SoftBank Dealt in Tenth of Worldwide VC Dollar Volume So Far in 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers,” Crunchbase, October 1, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://news.crunchbase.com/news/softbank-dealt-in-tenth-of-worldwide-vc-dollar-volume-so-far-in-2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers.

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Exhibit 3: WeWork Acquisitions and Investments

Source: Andy White and Priyamvada Mathur, “WeWork Has Acquired More Than 20 Companies in the Run-Up to its IPO,” PitchBook, September 5, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://pitchbook.com/news/articles/wework-has-acquired-more-than-20-companies-in-the-run-up-to-its-ipo.D o

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Exhibit 4: We Company’s Income Statement

Fiscal Year Ended December 31, Six Months Ended June 30 2016: 2024 – Do my homework – Help write my assignment online 2017 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers

Revenue $436,099 $886,004 $1,821,751 $763,771 $1,535,420 Expenses

Location Operating Expenses 433,167 814,782 1,521,129 635,968 1,232,941 Other Operating Expenses – 1,677 106,788 42,024 81,189 Pre-Opening Location Expenses 115,749 131,324 357,831 156,983 255,133 Sales & Marketing Expenses 43,248 143,424 378,729 139,889 320,046 Growth & New Market Development Expenses 35,731 109,719 477,273 174,091 369,727 General & Administrative Expenses 115,346 454,020 357,486 155,257 389,910 Depreciation & Amortization 88,952 162,892 313,514 137,418 255,924

Total Expenses 832,193 1,817,838 3,512,750 1,441,630 2,904,870 Loss from Operations (396,094) (931,834) (1,690,999) (677,859) (1,369,450) Interest and other income (expense), net (33,400) (7,387) (237,270) (46,406) 469,915 Pre-Tax Loss (429,494) (939,221) (1,928,269) (724,265) (899,535) Income Tax Benefit (provision) (16) 5,727 850 1,373 (5,117) Net Loss (429,510) (933,494) (1,927,419) (722,892) (904,652) Net Loss Attributable to Non-Controlling Interests – 49,500 316,627 94,762 214,976 Net Loss Attributable to WeWork Companies, Inc. (429,510) (883,994) (1,610,792) (628,130) (689,676)

Key Performance Indicators Workstation Capacity (in ones) 107,000 214,000 466,000 301,000 604,000 Memberships (in ones) 87,000 186,000 401,000 268,000 527,000 Enterprise Membership Percentage 18% 28% 38% 30% 40% Run-Rate Revenue (in billions) $0.6 $1.1 $2.4 $1.8 $3.3 Committed Revenue Backlog (in billions) $0.1 $0.5 $2.6 N/R $4.0

Source: The We Company S-1, August 14, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers.

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Exhibit 5: WeWork Revenue and Valuation History

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

$4,000

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

1/1/2010 – Essay Writing Service: Write My Essay by Top-Notch Writer 1/1/2011 1/1/2014: 2024 – Essay Writing Service. Custom Essay Services Cheap 1/1/2013 1/1/2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay 1/1/2015 – Research Paper Writing Help Service 1/1/2016: 2024 – Do my homework – Help write my assignment online 1/1/2017 1/1/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online 1/1/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers

Pre-money Valuation Proceeds Annual Revenues

Note: Various media entities have slightly differing valuations reported for each of WeWork’s financing rounds; these discrepancies likely have arisen due to opacity with respect to whether the option pool was set pre- or post-money in each of these rounds, as well as to the portion of each financing round that was primary versus secondary.

Source: WeWork profile, Motate, accessed December 28, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, http://www.motate.co/company/229-wework, inter alia.

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Endnotes 1 Anonymous WeWork employee, in an interview with the authors, November 25, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. 2 Katherine Clarke, “Neumann on Tap,” The Real Deal, January 2013, https://therealdeal.com/issues_articles/

neumann-on-tap. 3 Maya Kosoff, “How WeWork Became the Most Valuable Startup in New York City,” Business Insider, October

22, 2015 – Research Paper Writing Help Service, https://www.businessinsider.com/the-founding-story-of-wework-2015 – Research Paper Writing Help Service-10. 4 Ibid. 5 Clarke, “Neumann on Tap.” 6 “The Little Trick WeWork’s Adam Neumann Uses to Charm Investors,” The Real Deal, October 19, 2017,

https://therealdeal.com/2017/10/19/the-little-trick-weworks-adam-neumann-uses-to-charm-investors. 7 Clarke, “Neumann on Tap.” 8 Alex Konrad, “Inside the Phenomenal Rise of WeWork,” Forbes, November 5, 2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay, https://www.forbes.com/

sites/alexkonrad/2014: 2024 – Essay Writing Service | Write My Essay For Me Without Delay/11/05/the-rise-of-wework/#3d6f7e716f8b. 9 Claire Boyte-White, “How WeWork Works and Makes Money,” Investopedia, November 4, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers,

https://www.investopedia.com/articles/investing/082415/how-wework-works-and-makes-money.asp. 10 “What Is the Member Network?” WeWork, accessed January 9, 2020, https://help.wework.com/hc/en-us/

articles/212046786-What-is-the-Member-Network-. 11 The We Company S-1, August 14, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. 12 “Revenue of International Workplace Group (IWG) Worldwide from 2011 to 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online,” Statista, accessed December

20, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.statista.com/statistics/553936/revenue-of-regus-worldwide. 13 IWG, Annual Report and Accounts 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, http://investors.iwgplc.com/~/media/Files/I/IWG-IR/reports-and-

presentations/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers/consolidated-report-and-accounts-2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online.pdf. 14 Ethan Rothstein, “News As Market Wobbles, Rivals Take Aim At ‘Magic Money’ WeWork,” Bisnow, August

18, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.bisnow.com/national/news/coworking/coworking-peril-wework-ipo-industrious- breather-100397.

15 “WeWork’s $47 Billion Dream: The Lavishly Funded Startup That Could Disrupt Commercial Real Estate,” CB Insights, January 31, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.cbinsights.com/research/report/wework-strategy-teardown.

16 Ibid. 17 Konrad, “Inside the Phenomenal Rise of WeWork.” 18 Katie Warren and Taylor Nicole Rogers, “Meet Masayoshi Son,” Business Insider, November 6, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers,

https://www.businessinsider.com/masayoshi-son-softbank-net-worth-lifestyle-silicon-valley-estate-photos-2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers- 6#sons-investment-strategies-are-considered-unconventional-in-silicon-valley-7.

19 Katrina Brooker, “WeFail: How the Doomed Masa Son–Adam Neumann Relationship Set WeWork on the Road to Disaster,” Fast Company, November 15, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.fastcompany.com/90426446/wefail-how- the-doomed-masa-son-adam-neumann-relationship-set-wework-on-the-road-to-disaster.

20 Polina Marinova, “How Venture Capital Mega-Funds Are Widening the Funding Gap,” Fortune, March 22, 2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online, https://fortune.com/2018: 2024 – Write My Essay For Me | Essay Writing Service For Your Papers Online/03/22/venture-capital-funding-gap-softbank.

21 Ibid. 22 Brooker, “WeFail.” 23 Ibid. 24 Anonymous WeWork employee. 25 Maureen Farrell and Eliot Brown, “The Money Men Who Enabled Adam Neumann and the WeWork Debacle,”

Wall Street Journal, December 14, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.wsj.com/articles/the-money-men-who-enabled-adam- neumann-and-the-wework-debacle-11576299616.D o

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26 Anonymous WeWork employee. 27 Ibid. 28 Brooker, “WeFail.” 29 Ibid. 30 Anonymous WeWork employee. 31 Ibid. 32 Ibid. 33 Scott Galloway, “WeWTF,” No Mercy/No Malice (blog), August 16, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.profgalloway.com/

wewtf. 34 The We Company S-1, August 14, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers. 35 Alison Griswold, “Get Ready For Some Creative Accounting in WeWork’s IPO Filing,” Quartz, August 13,

2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://qz.com/1685919/wework-ipo-community-adjusted-ebitda-and-other-metrics-to-watch-for. 36 Ellen Huet, “WeWork Gave Founder Loans as It Paid Him Rent, IPO Filing Shows,” Bloomberg, August 14,

2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.bloomberg.com/news/articles/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers-08-14/wework-gave-founder-loans-as-it-paid-him-rent- ipo-filing-shows.

37 Matt Levine, “We Looks Out for Our Selves,” Money Stuff, Bloomberg, August 19, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.bloomberg.com/opinion/articles/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers-08-19/we-looks-out-for-our-selves.

38 Randyl Drummer, “WeWork Adds Ace my homework – Write my essay – Harvard Professor to Board, Reverses Its Trademark Purchase From CEO,” CoStar News, September 4, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.costar.com/article/404213830/wework-adds-harvard-professor- to-board-reverses-its-trademark-purchase-from-ceo.

39 Rani Molla and Shirin Ghaffary, “The WeWork Mess, Explained,” Vox, October 22, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.vox.com/recode/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers/9/23/20879656/wework-mess-explained-ipo-softbank.

40 Rebecca Aydin, “WeWork Cofounder Rebekah Neumann, Cousin of Gwyneth Paltrow, Reportedly Demanded Employees Be Fired Within Minutes of Meeting Them Because She Disliked Their ‘Energy,’” Business Insider, September 18, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.businessinsider.com/wework-rebekah-neumann-adam-gwyneth-paltrow- energy-goop-2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers-9.

41 Matt Levine, “What If We Wants to Wait?” Money Stuff, Bloomberg, September 10, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.bloomberg.com/opinion/newsletters/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers-09-10/money-stuff-what-if-we-wants-to-wait.

42 Eliot Brown, “How Adam Neumann’s Over-the-Top Style Built WeWork. ‘This Is Not the Way Everybody Behaves.’” Wall Street Journal, September 18, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.wsj.com/articles/this-is-not-the-way-everybody- behaves-how-adam-neumanns-over-the-top-style-built-wework-11568823827.

43 Ibid. 44 Matt Levine, “We Wants a New Boss,” Money Stuff, Bloomberg, September 23, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers,

https://www.bloomberg.com/opinion/articles/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers-09-23/we-wants-a-new-boss. 45 Anonymous WeWork employee. 46 Maureen Farrell and Eliot Brown, “SoftBank to Boost Stake in WeWork in Deal That Cuts Most Ties With

Neumann,” Wall Street Journal, October 22, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.wsj.com/articles/softbank-to-take-control-of- wework-11571746483.

47 Paige Leskin, “All the Unusual Investments WeWork’s Cofounder Adam Neumann Has Made, From a Medical Marijuana Provider to a Wave Pool Maker,” Business Insider, September 24, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.businessinsider. com/wework-adam-neumann-investments-wavegarden-laird-superfood-full-list-2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers-9#but-lairds-company- isnt-the-only-superfood-business-in-which-wework-has-invested-wework-has-also-put-money-into-kitu-life- which-makes-dairy-free-protein-heavy-superfood-coffees-creamers-and-espresso-5.

48 Nicolas Vega, “WeWork Employees Request ‘Fair’ Layoffs in Letter Blasting ‘Greed’ of Ex-CEO,” New York Post, November 8, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://nypost.com/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers/11/08/wework-employees-request-fair-layoffs-in-letter-blasting- greed-of-ex-ceo.D o

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49 Gabriel Sherman, “‘You Don’t Bring Bad News to the Cult Leader’: Inside the Fall of WeWork,” Vanity Fair, November 21, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.vanityfair.com/news/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers/11/inside-the-fall-of-wework.

50 Matt Levine, “How Do You Like We Now,” Money Stuff, Bloomberg, October 23, 2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers, https://www.bloomberg.com/opinion/articles/2019: 2024 – Online Assignment Homework Writing Help Service By Expert Research Writers-10-23/how-do-you-like-we-now.

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