WeWork’s Big IPOoops
Over time, we have fielded many inquiries about WeWork. This never came as a surprise. After all, we have firsthand experience with what WeWork provides: It is an exciting glimpse into the evolving American workplace. Mornings typically begin with complimentary micro-roasted coffees, teas, or fruit-infused water. Bagels, yogurt, and other forms of fuel abound to start your day. The common areas, the conference rooms, the private office spaces and even more private phone booths are the product of loving attention to every detail. Any given week will feature lunch-and-learn information sessions, in-house networking opportunities, guided meditations, or kickboxing classes. To top it all off, the taps in the common kitchens are flowing with free craft brews. And (again, from firsthand experience), it’s really good beer.
This only scratches the surface of the plethora of ways that WeWork turns each workday into a thrilling experience. Suffice it to say that the energy one feels in a WeWork location is hard to beat. But sadly, WeWork’s big splash into the pool of private enterprise produced some most unwelcome waves.
WeWork co-founder and CEO Adam Neumann gradually became known more for his hijinks and eccentricities than for his inventiveness. In a corporate world that elevates the likes of Elon Musk, this is no small feat. Neumann is regularly seen strolling barefoot through the Hamptons… and through his offices at WeWork… and along the crusty old sidewalks of Manhattan. He attributes this habit to his upbringing in an Israeli kibbutz. He has been heard announcing his intention to become the world’s first trillionaire and his sincere plans of opening a WeWork on Mars. He is known to pounce (barefoot, of course) onto tables and desks when he wishes to emphasize a point. He demands that an abundant supply of tequila and shot glasses is always within his reach, flying into a venomous rage when this requirement is not met. The list continues, but this is not a gossip column.
More damaging and more germane to this discussion was Neuman’s eyebrow-raising behavior related to running his business. Last July, the Wall Street Journal reported that Neumann had cashed out $700 million of his own WeWork shares, causing many to wonder how much confidence he had in the company. He had partial ownership interests in four buildings that leased space to WeWork, creating a potential conflict of interest. More recently Neumann founded We Holdings, LLC, through which he trademarked the word “we” as a corporate moniker. Then, ahead of its S-1 filing (the SEC paperwork that precedes an IPO), WeWork was required to purchase the trademark from Neumann for about $6 million as part of its rebranding as “The We Company”. Neumann would later return this payment amid heavy criticism.
WeWork’s biggest investor, SoftBank, was largely responsible for vaulting the company to a head-scratching valuation of $47 billion. This was not enough to convince Neumann to heed SoftBank chairman Masayoshi Son’s polite suggestions regarding the company’s IPO, such as delaying the move until a fiscally prudent moment and, later, eliminating the phrase “elevate the world’s consciousness” from the S-1 documentation. As Neumann boldly plowed forward with his kooky vision and put plans for a public debut in motion, the company was forced to consider (much to SoftBank’s chagrin) a drastic reduction in valuation in order to allay concern among the broader banking community. Fed up, Son initiated the effort to remove Neumann from his throne. Finally, in a twist nobody saw coming, Neumann joined Son’s cause and voted for his own ouster. Today, he is a nonexecutive chairman with less than a third of the voting power he wielded just ten days ago. Word has it he still doesn’t like wearing shoes.
To the astonishment of precisely nobody, The We Company withdrew its S-1 filing last Monday, delaying its IPO prospects indefinitely. We sincerely find no joy in this turn of events that negatively impacts the lives of scores of innocent people, but we expect that this spectacular fall from grace will be taught in business schools around the world for decades to come.
The keenest observers, as well as anybody else who opens our weekly emails, might detect a different tone in this week’s Iron Edge newsletter. Typically, we sing the praises of the most exciting private companies to which we have access, but the WeWork saga is far from flattering. Notably, shares of WeWork have been available to us for well over a year and a half, but not once have we published a piece extolling this company. Go ahead, check your old emails. You will find Palantir, Impossible Foods, SpaceX, Topgolf, SoFi, and many more, but not WeWork. Iron Edge VC is by no means in the business of offering investment advice. We pointedly avoid doing so. Our function is to facilitate the purchase of pre-IPO equity, not to direct it. Iron Edge provides many great opportunities to build wealth, but in the end, our investors’ decisions are at their own sole discretion. Nonetheless, this does not preclude us from shining a spotlight where it should be shone and keeping some other objects in relative darkness.
We at Iron Edge VC are proud to have pre-IPO access to the shares of the most promising and exciting private companies. If you would like to learn more, or if you know of anybody else who would, please do not hesitate to contact us by clicking “Get in Touch” below.
As always, shares are available on a first come, first served basis.