As Adam Neumann slipped off the throne as CEO, he accomplished another fantastic feat—plunging his company’s morale faster than its assessed market value is sinking. The two Neumann enablers promoted to serve as co-CEOs—with Neumann hovering in the background, retaining a three to one voting control of the board—suggests merely a cosmetic governance intervention. What WeWork needs is someone new to the firm but with a track record of disaster recovery and entrepreneurship.
Someone like John Legere of T-Mobile, who conveniently has a terrific relationship with WeWork’s major investor Softbank.
Neumann’s self-dealing and empty showmanship cost him the confidence of Softbank, along with the confidence of prospective investors. With rumors of one-third of its work force facing pink slips amid the 75% decrease in capital valuation, culture and financial drain are just two of the company’s daunting problems. There was also the issue of a governance structure that allowed his wife to name a successor if he was incapacitated, while she nosed out the highly regarded chief brand officer to snag the position herself.
We Work’s new co-CEOs also must address the misguided brand image that by renting shared workspace to lonely 20-somethings searching for a next episode of the old Friends TV series, is somehow a tech company. Good luck with that. Even with the requisite bean bag furniture, Foosball games, fake distressed wood floors and zippy Espresso machines, they are a not high-tech company.
In fact, WeWork doesn’t even have a particularly novel business model. The shared workspace idea, on a grand global scale, was pioneered 40 years ago by Australia’s Serve Corp in 38 major cities, and by IWG (Regus), which serves more than 70 countries and twice as many cities than the flamboyant WeWork. Both of these companies are making money, while WeWork loses $2 billion a year or $120,000 every hour every day. The logic for the puffed up mysterious claimed valuation of $47 billion with only $12 billion of capital was finally revealed in the S1 IPO filing. They are trapped by a coincidental $47.2 billion in long-term leased space and only $3.4 billion of short-term tenant leases as coverage!
Despite this disaster scenario, the top management enabled Neumann to buy buildings and covertly lease the space back to his own company, snag the name “We” to sell back to his own company and sell out $700 million of equity in his own company in advance of the planned IPO. The elevation of vice chairman Sebastian Gunningham, who was previously an executive at Amazon and CFO Artie Minson, formerly of AOL and Time Warner Cable, will assume the roles of co-CEOs, the company said. With the exception of rare examples such as Oracle and Bridgewater, the co-CEO model rarely works. More importantly, they need leadership not tied to Neumann and soiled by being a part of his team’s ill-fated maneuvers.
Enter Legere. While he’s almost as well-known publicly for his long hair and flamboyant persona as Neumann, the comparisons stop there. Legere has a great track record as a CEO in building healthy businesses out of distress situations. He’s been very good at revivals and resuscitation, as evidenced by his tenure at Global Crossing Ltd. after it was rocked by an accounting scandal in the early 2000s and his work building up “enormous” value at T-Mobile after AT&T dropped its bid to buy the wireless provider. Moreover, Sprint’s owner, Softbank’s Group’s Masayoshi Son has great respect for him.
Then there’s this: Legere may available soon, dressed and ready for the spot as soon as the T-Mobile-Sprint merger closes. How’s that for timing?
Masayoshi Son, are you listening?