It is not surprising to read a headline that says that Softbank CEO, Masayoshi Son, spoke to near-empty room at Saudi business summit especially after the recent WeWork IPO fallout. Softbank was the biggest investor in WeWork with an initial investment of more than $10 billion.

A Bloomberg opinion piece stated how “Mr. Neumann (WeWork’s ex-CEO) told others that Mr. Son (Softbank CEO) appreciated how he was crazy—but thought that he needed to be crazier”. This was in 2017. WeWork then was the darling of venture investors and a symbol for cool offices. It rose like a Phoenix but things changed and since august, WeWork has seen a steep fall not in terms of valuations but also in terms of public image.

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WeWork, ex-CEO Neumann, Softbank sued over botched IPO, plummeting value

And this was the reason why everyone was looking forward to WeWork’s IPO papers. They privately valued the company at a whopping $47 billion but all was not well. The piling losses, corporate governance issues and the business dealings of the CEO eventually forced the company to shelve its IPO plans in October.

From the IPO paper, investors observed that WeWork lost $1.61 billion in 2018, up from $884 million in 2017 and $429.7 million in 2016. WeWork had a net loss of $689.7 million on revenue of $1.54 billion for the six months ended in June. Also, that CEO and co-founder Adam Neumann owned several of the buildings leased by We Work and some reports suggested that the CEO earned millions through leasing his buildings in New York and New Jersey to WeWork. The Company WeWork paid its own CEO, Adam Neumann, $5.9 million for the “We” trademark when the company reorganized itself earlier this year.

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In fact, the Wall Street Journal also reported that Neuman cashed out $700 millon in stock options before the Company’s IPO. Post this, Morgan Stanley backed out of the IPO and the pressure made Adam return the $6mn that the company paid him for using “We” trademark.

The last straw that broke the camel’s back when the biggest investor Softbank urged the company to postpone the IPO due to a lack of interest from investors. This despite the fact that the company almost halved the initial valuation.

Post this, there were also filings by the company that slashed Neuman’s voting power from 20 to 10 percent and that said that the company could hire a lead independent director by the end of the year.

In September, the company officially delayed its IPO and on September 25, Neuman stepped down as the CEO.

This was followed by reports that nearly 2000 employees might lose jobs at WeWork following the anger towards the founder.

WeWork officials, including co-founder and former Chief Executive Adam Neumann, were being sued by minority shareholders to recoup losses.

WeWork’s description of Adam Neumann, its co-founder, and chief executive, in an SEC filing, says “Adam is a unique leader who has proven he can simultaneously wear the hats of a visionary, operator, and innovator while thriving as a community and culture creator. Given his deep involvement in all aspects of the growth of our company, Adam’s personal dealings have evolved across a number of direct and indirect transactions and relationships with the Company.”

However, this filing fails to recognize the impact he had on Softbank, the employees and the other minority investors who lost a lot of money for his personal benefits.

This case should serve as a great case study for a lot of business and finance graduates in the coming future as to how someone can walk away from a corporate turmoil with tonnes of money.

First Published:Nov 11, 2019 4:22 PM IST