This story is adapted from Wall Street Journal reporters Maureen Farrell and Eliot Brown’s new book, “The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion,” available July 20, from Crown, an imprint of Random House, a division of Penguin Random House.
Adam Neumann was barking into his phone at one of his top deputies, livid over the headlines and chyrons flashing on TV about his company.
It was August 14, 2019, and WeWork — the shared-office-space startup Neumann cofounded — had just revealed its financials to the world as part of a planned initial public offering.
Neumann, the high-voltage chief executive, aged 40, was expecting a good day with a wave of positive press that could propel his company to a blockbuster IPO and enhance the near celebrity status he and his wife, Rebekah, basked in. Such success had become routine: Over the previous nine years, he’d easily won a top-notch roster of the world’s investors, high-caliber recruits, and adulatory profiles in the media to create the US’s most valuable startup with a value of $47 billion.
Instead, negative press was mounting as the hours ticked away, skewering WeWork for its hefty losses ($1.6 billion), the kooky language in its financial document (it was dedicated to “the energy of we”), Neumann’s long list of conflicts (he rented properties to WeWork), and — glaringly — a two-sentence disclosure that WeWork had purchased the trademark to the word “We” from a Neumann-run entity for $5.9 million in stock.
On the phone, Neumann screamed at copresident Jen Berrent, who, along with CFO and copresident Artie Minson, was helming the IPO. The trademark fuss in particular had blindsided him.
Why didn’t you tell me, he yelled.
Neumann was a laughingstock, and he wasn’t taking it well.
Six weeks later Neumann was out as CEO. Investors balked at the conflict-ridden, loss-heavy office-space company, and WeWork underwent one of the highest-profile corporate meltdowns in recent memory. The IPO was postponed indefinitely. Nearly $40 billion of value vanished.
Warning signs of the collapse were littered throughout WeWork’s short and tumultuous operating history. But the six months leading up to the planned IPO brought together a particularly combustible combination of motives and personalities that would prove devastating.
, which in theory act as sober advisors who help guide inexperienced companies through the rigors of the public-listing process, instead pumped up the expectations of Neumann and his team, enabling some of Neumann’s worst impulses as they sought to win the prestige of leading the IPO, and the fees that come with it.
Neumann, a consummate negotiator, held off on officially appointing a primary “lead left” underwriter for the IPO, deliberately creating a hypercompetitive environment that would pit the banks against one another for months. As the bankers did backflips to win Neumann’s favor, they held back on informing him about cold hard truths. They knew Neumann didn’t like bad news and tended to look elsewhere for a more optimistic opinion.
Despite the involvement of some of the world’s most powerful and influential bankers, including JPMorgan’s Jamie Dimon, by the time WeWork’s IPO advisors tried to reel Neumann back to reality, it was too late.
The following account is based on interviews with numerous current and former WeWork employees, bankers, and others who worked on the attempted IPO.
The banks’ work preparing for the initial public offering had begun in earnest in April, when Neumann — while throwing himself a giant 40th birthday party in the Maldives that included a 239-foot, five-story yacht named Titania — announced WeWork’s intention to conduct an IPO.
Neumann had long courted investment bankers and loved meeting with them. Eager for his business down the line, bankers showered him with attention, free consulting, and loans, both for Neumann personally and for the business. The expected prize at the end of the day was a plum role in a monster IPO.
In May 2019, fresh off his Maldives trip, Neumann summoned bankers from JPMorgan Chase, Goldman Sachs, and Morgan Stanley to the low-slung WeWork headquarters on Manhattan’s West 18th Street. It was time for the ritual known on Wall Street as the IPO “bake-off”: Each bank would take turns pitching Neumann and his team, and WeWork would choose the best to lead the listing.
You’re not scaling up your enthusiasm as high as it can be.
First up was Morgan Stanley, led by its star tech banker, Michael Grimes, who played a central role in the IPOs of most top Silicon Valley companies, including Google, Facebook, LinkedIn, and Uber. He was known for theatrical moves to win over entrepreneurs — for Uber, he worked shifts as a driver and made a presentation outlining what he’d learned behind the wheel. But Grimes was operating at a disadvantage because his team had a more limited history with Neumann than it had with some of its rivals.
His pitch: Morgan Stanley best knew how to position businesses with heavy losses to investors. He warned of challenging market conditions. Lyft had just gone public, and its stock was starting to fall. Uber, on the cusp of an IPO, was getting a similar reception from investors wary of its losses.
Investors, he said, would be even more nervous about WeWork, particularly without the right guidance.
You need us, Grimes told Neumann.
Morgan Stanley would market WeWork to prospective investors at a valuation of between $25 billion and $65 billion, he told Neumann.
Neumann wasn’t impressed with the relatively conservative message. There would be fewer skeptics than Grimes suggested, he thought.
“You’re not scaling up your enthusiasm as high as it can be,” Neumann told Grimes.
Next came Goldman Sachs.
Goldman had developed deep ties with the rapidly growing startup over the previous few years. Neumann became friends with Lloyd Blankfein before he left as CEO at the end of 2018, meeting him for dinners and calling him for advice. Shortly after David Solomon took over as CEO, he dined with Neumann and played him some of his music (the banker CEO was known for his hobby of playing occasional gigs as a dance-club DJ). Neumann whisked him around 85 Broad, the former Goldman headquarters where WeWork had a large office.
For the bake-off, the Goldman team handed Neumann a picture-filled book, tailor made to appeal to his predilections and his sense of self.
The cover page used WeWork’s tagline “Do What You Love” scrawled in cursive font. Its second page featured inspirational quotations from Mother Teresa, Lin-Manuel Miranda, Steve Jobs, and Bob Marley (“Love the life you live, live the life you love”).
One page, titled “Your Path to $1 Trillion,” drew out how the company could hit that lofty valuation over the next decade and a half. The Goldman team compared WeWork to Salesforce, Facebook, and
At the end of the book, Goldman laid out its range, which was calculated in a slightly different way compared to Morgan Stanley. WeWork, it projected, could expect to go public with the company valued between $61 billion and $96 billion.
Neumann was elated.
He loved the pitch and was thrilled with the valuation. Goldman clearly got WeWork, he thought. At $96 billion, WeWork would be worth more than General Electric. It would be worth more than Goldman Sachs.
Read more: See the pitch book Goldman Sachs created for Neumann during the WeWork bake-off
Sweetening the pot: Goldman was bullish on WeWork’s ability to borrow. It was readying a plan to get WeWork up to $10 billion in loans.
The last to pitch was JPMorgan, which entered the bake-off as the clear favorite. The bank’s asset-management arm had invested in WeWork years earlier, when it was valued at $1.5 billion and JPMorgan had become a huge lender to the company but also to Neumann personally, giving him more than $97 million in mortgages and other loans.
Pressure was high on Noah Wintroub, JPMorgan’s top tech banker. Wintroub, a JPMorgan veteran, had been grasping to push the bank into the top tier of tech advisory work but kept losing key roles to rivals at Morgan Stanley and Goldman. The US’s largest bank wanted to be the top bank in Silicon Valley, and much of that fell on him.
Wintroub’s presentation lacked the pomp of Goldman’s. Wintroub talked about WeWork’s strategic strengths, how the company was on the path to reshaping the way large corporations would rent real estate. Wintroub landed on a price that was high for a real-estate company, but sober compared to Neumann’s expectations.
JPMorgan’s range: $46 billion to $63 billion.
Neumann was displeased. After the pitch, he berated Wintroub, an unabashedly emotional banker whose way of courting clients meant he’d sometimes drop by their offices with coffee. Despite all his years following WeWork, Neumann told Wintroub, he just didn’t understand the company. Wintroub didn’t believe in WeWork, Neumann said. Twisting the knife, he told him that Goldman did.
“They’re going to take over,” he told Wintroub.
After all the time and effort Wintroub had invested in the relationship with Neumann, the declaration was a stinging slap in the face.
As the pain set in at JPMorgan, Goldman Sachs worked on its plan to provide up to $10 billion in loans to WeWork, a key ingredient of its winning pitch. For Neumann, that amount of money with Goldman’s imprimatur on it was critical. The money, which would come in over time as WeWork hit milestones set out by the bank, even raised the possibility that the company could eschew the public markets altogether and simply rely on debt to fund its business. It was a tempting alternative for Neumann.
Goldman’s CEO David Solomon gave Neumann personal assurances that the deal would get done. Neumann told other bankers that Solomon had looked into his soul and knew what he wanted.
But as more executives at Goldman looked at the debt deal, the bank’s support waned. Goldman’s bankers eventually told Neumann and WeWork that it would be able to lend WeWork only some of the $10 billion — perhaps $3.65 billion — and would ask other banks like JPMorgan to help with the rest.
Neumann felt betrayed. He called Solomon, livid. “You abandoned me,” Neumann told him.
Just as quickly as Goldman had won Neumann’s loyalty and the role of top advisor, the bank found itself out of favor.
JPMorgan swooped in. Dimon had his bankers quickly assemble a plan to help WeWork borrow $6 billion once it completed its IPO, and Neumann told the bank it would lead the listing.
Goldman’s bankers, though, refused to give up so easily.
Srujan Linga, a newly minted managing director who impressed WeWork’s team as a financial whiz, had been working on the debt deal for weeks. He was sure he could persuade Neumann to stay with Goldman if he had a bit more time.
In early July, Linga and another executive traveled to Neumann’s house in the Hamptons to pay the CEO a visit.
When the bankers arrived, Neumann and his deputy and friend Michael Gross invited them to his sauna. It was a favored venue, Neumann explained, for thinking and conversation. As the four men sat inside sweating, Neumann told the Goldman bankers why he was going with JPMorgan. It was a sure, safe bet. Dimon had personally promised that JPMorgan could get them $6 billion, Neumann said.
Linga and his colleague persisted, pressing the virtues of their plan. It simply was a better structure, they told him — the best way for WeWork to keep up its growth.
As the bankers thought their message was starting to sink in, Neumann walked them from the sauna toward his ice bath. Neumann loved ice baths. He had one installed in his New York office, and once showed off a picture of a set of executives with the title “CWeO” crammed together in an ice bath.
No one, Neumann declared to the bankers, could possibly stay in longer than five minutes.
Linga protested. He took very cold showers every day after meditating. He’d do it.
The young banker slid in. Neumann kept an eye on the clock and Gross snapped photos.
As the ice-cold water enveloped his legs, Linga joked he wouldn’t get out until Neumann took Goldman’s debt deal, not JPMorgan’s. As the clock passed five minutes, Neumann watched in amazement.
Finally Linga emerged, shaking.
But in the end, Linga’s ice gambit was for naught. Days later, Neumann informed the Goldman team that he was officially taking JPMorgan’s deal.
A power grab and an intervention
About the same time, a host of WeWork lawyers, accountants, and executives were drafting a crucial document called an S-1. Also known as an IPO prospectus, it’s a guidebook typically that mixes a narrative extolling the company’s vision and success alongside pretty graphs with detailed numbers that shed light on its revenue and expenses and show healthy growth.
Normally the bankers would be heavily involved in this process, writing sections themselves. Instead, WeWork executives felt they took a backseat role, letting Neumann and his top deputies run the show.
Part of Neumann’s focus was on elevating the brand of the company and casting himself and his wife, Rebekah, as new-age visionaries.
Rebekah Neumann became heavily involved in certain parts of the document, including an “insert,” a montage of photos with captions in the middle of the prospectus that defined WeWork’s ethos and mission.
Photographers were sent around the world to document WeWork members; Rebekah and aides pored over thousands of options before making a single selection. “It doesn’t feel soulful enough,” she said of certain pictures. “Make it look more ’70s,” she said, asking for photos to be more of the style of Wes Anderson. By the time the document was finally finished, designers counted it went through 37 rounds of revisions.
Unusual new-age lingo was another contribution. She insisted the document be dedicated to “The energy of we — greater than any one of us but inside each of us,” against repeated objections from staff.
Staff working on the document worried it was going to be a mess. They had hoped that the bankers — with JPMorgan in the lead role and Goldman in second — would bring some order to the chaos. While the bankers did have some constructive advice, they, too, were deferential to Neumann, reluctant to give him tough news, as they appeared endlessly competitive with each other.
Neumann added to their insecurity.
Aides watched as he got one piece of advice from JPMorgan’s Wintroub, hung up, and immediately called rival David Ludwig from Goldman Sachs with the same question. Each bank constantly felt it was being undermined by its rival, rather than part of the same team. Even though JPMorgan had been christened the lead, neither bank seemed to feel secure, given Neumann’s propensity for change.
As the summer went on, the bankers realized WeWork wouldn’t be immune to the market chill and the investor wariness over money-losing companies like Uber and Lyft.
In a meeting, bankers from JPMorgan and Goldman gave Neumann a primer on the mechanics of the IPO process, and within it they had a slide that implied WeWork would have a $30 billion valuation, a sharp pullback from the far rosier projections they’d given to Neumann months earlier and from the $47 billion mark that SoftBank had valued WeWork at in a private funding round in January.
Neumann lost it. He berated the bankers when he saw the number, demanding answers.
The bankers demurred. They simply said it was an illustrative valuation and nothing to do with the reality of WeWork.
As the IPO neared, WeWork’s supersize losses weren’t the only clear sources of concern for investors. Adam Neumann’s unusual entanglements with his own company were another glaring problem.
Instead of cleaning things up over the summer, Neumann sought to secure even more power over the company he cofounded.
Neumann’s shares in WeWork already had the power of 10 votes, a level that gave him a very healthy majority control, given that he held about 30% of the company’s stock.
The status-conscious cofounder had become obsessed about the handful of CEOs of lesser companies who had even more potent shares. The CEO of Peloton had 20 votes per share, he carped to lieutenants. Peloton! Surely he deserved 20, too.
Neumann wanted the ability to sell lots of stock and stay in control, he said. He wanted to give at least $1 billion to charity over the next decade, a pledge he’d make in the prospectus. He wanted to ensure that Rebekah and his children would take over the company if he died.
Jen Berrent, who had long been an ally and staunch defender of Neumann, began to push back more, fraying her relationship with Neumann. The 20 votes weren’t necessary, she told him. Aides said they heard them frequently yelling at each other through the walls.
Finally, the bankers began to take a more assertive approach.
Seeing the deal as an important one, Dimon deputized Mary Callahan Erdoes, the 52-year-old CEO of JPMorgan’s wealth-management division and one of a handful of executives mentioned as a Dimon successor, to head up the bank’s efforts.
She grew concerned.
When Erdoes began to take stock of all of Neumann’s power and money grabs that would be disclosed in the prospectus, she told him all the provisions could mean a hit to WeWork’s valuation of as much as 30%.
Aides had endlessly watched Neumann obsess over valuation as long as they’d known him, so they expected this argument to resonate. Yet Neumann shrugged it off.
Any hit to valuation would be a temporary dip, he said. After WeWork went public, the markets would see its extraordinary growth continue and its valuation would soar, he told them.
Edging closer to the IPO, Dimon got more involved.
As the leader of the largest US bank, with more than 250,000 employees and $2.7 trillion in assets, Dimon usually left questions about the fine print of an IPO to underlings.
This one was different. WeWork was expected to be one of the largest-ever startup IPOs and, if it went well, could help raise the bank’s profile in the Silicon Valley IPO market, giving it more credibility as a lead advisor. Dimon had been pushing for years to up the bank’s presence in the tech capital. JPMorgan even bought the naming rights to the new Warriors basketball arena to help put its stamp on the region.
To help try to pull Neumann back from some of his attempts at taking more power, Dimon hopped on a call. He zeroed in on the 20 votes per share, among other issues.
You shouldn’t do it, Dimon told Neumann.
It wasn’t fair to his shareholders, he said. In business, Dimon said, there’s “what I should do” and “what I could do.” Grabbing more power from investors through the restructuring, Dimon advised him, just wasn’t the right thing to do.
Yet the pleas of the nation’s top banker didn’t move Neumann: He was determined to have the added power.
Following the Dimon call, WeWork held a board meeting to address the changes to his votes and some other provisions.
Just as he resisted warnings from Dimon, Neumann won over the pliant board.
Director Steven Langman cautioned him that WeWork was giving investors lots of reasons not to invest in the company; they shouldn’t add more. But in the end, the directors all acquiesced to Neumann on the voting issue and approved the newly potent shares.
Neumann, having spent days endlessly arguing with Berrent over the 20 votes and other issues, told her after the meeting that his success with the board proved him right.
He said, “You almost let your fairness get in the way of what we can get.”
For weeks, the WeWork IPO team had been consumed with disclosures sure to reflect poorly on Neumann when they came to light in the public version of the S-1. Jimmy Asci, WeWork’s head of communications, worked with his team to compile a 20-plus-page list cataloging all the high-risk items that the press could pick up on that would look bad. Restructuring the company for Neumann’s tax benefit, a giant pay package, properties leased to Neumann, the 20 votes per share — they were all in there.
Also mentioned was a brief disclosure that received scant notice internally: WeWork had purchased the rights to trademarks relating to the word “We” from We Holdings LLC, Neumann’s LLC, paying the entity $5.9 million in stock.
Years earlier, Neumann and cofounder Miguel McKelvey had taken out some trademarks tied to the word, but never transferred them to WeWork.
Now was a good time to clean that up, the lawyers decided. Neumann’s personal lawyers, at Paul, Weiss, Rifkind, Wharton & Garrison, figured Neumann should be compensated for the value of the trademarks, given that there could be tax implications, and WeWork’s lawyers, thinking relatively little of it, agreed. Neumann was informed but didn’t even seem to notice it. At a meeting where it was briefly mentioned to the two founders, McKelvey expressed surprise, joking he could buy a car with the proceeds.
At most any other company, a chief executive personally profiting off a trademark he’s selling to his company would easily jump out as a conflict that would project a poor image for the company and CEO. Bankers and executives would insist it come out. Staff might gossip about it. Add on to that the heavy level of irony — the CEO of a company that casts itself as devoted to sharing was personally profiting off the word “We” — and alarms would surely go off.
WeWork, though, was drowning in terrible images related to Neumann. The bankers, the lawyers, everyone had become calloused to Neumann’s grabs for money and power, and everyone was operating according to their own cost-benefit analyses in the quest to win the prize. A $5.9 million deal just didn’t stand out to Neumann or anyone else.
The public, though, wouldn’t prove so forgiving.