WeWork co-founder Adam Neumann agreed on Tuesday to resign as chief executive and give up majority voting control, after SoftBank Group Corp and other shareholders turned on him over a plunge in the USA office-sharing start-up's estimated valuation.
Two senior WeWork executives, Sebastian Gunningham and Artie Minson, were appointed as co-CEOs.
Neumann, the company's cofounder, served as chief brand and impact officer, and CEO of WeGrow - a subsidiary of WeWork parent The We Company.
Other shareholders were calling for an inquest into Neumann's use of company money and whether he took drugs while working, The Times said.
SoftBank invested in We Company at a $47-billion valuation in January.
Of course, Neumann has the power through his super majority shares to fire the board, but going nuclear would only reinforce his reputation as an imperial CEO and hurt the stock offering, sources added. The company, which is deeply unprofitable, will need to find an alternative source of capital next year if the IPO falls through.
In a news release, Neumann said the scrutiny directed toward him "had become a significant distraction" and that it was in the company's best interest for him to step down.
Gunningham and Minson said they "anticipate hard decisions ahead" to protect the company's "long-term interests and health", they wrote in an email to staff reviewed by Bloomberg. Over the last month, We worked to address some of those issues, but the company's unusual governance and concerns about its resiliency in an economic downturn were still a red flag to some investors. WeWork, now known as We, ushered in a new way to think about designing and leasing office space - but remains far from profitable. Now, its IPO is on ice - it was originally supposed to go public this month, but is now said to be aiming for the end of the year. Neumann will remain chairman of We Company, the report said. In London, it owns or leases more spaces than any enterprise except the government.
WeWork's revenue has risen sharply, reaching $1.8billion in 2018.
The story of what happened is complex and still ongoing, but one particular thread stands out from the last month of WeWork news: CEO Adam Neumann's repeated self-dealing while leading the company.
Neumann later returned the money in stock.
The company's share sale prospectus warned: "We have a history of losses and, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability at a company level ... for the foreseeable future". Benchmark, also an investor in Uber, was reportedly behind the push to oust CEO Travis Kalanick ahead of the ride-sharing startup's IPO.
Though Neumann later sold his stakes in the properties to an investment arm of WeWork, the deals raised concerns among investors that he was trying to enrich himself at the company's expense.