“YOU DON’T BRING BAD NEWS TO THE CULT LEADER”: INSIDE THE FALL OF WEWORK

Adam Neumann reimagined the millennial workplace as a capitalist kibbutz, and so dazzled Wall Street that his company was valued at $47 billion. He spent lavishly, and pressed forward even as “the narrative of the unicorn was ending,” says an executive. Now, after the collapse, he’s said to talk of himself as a martyr.

On the afternoon of September 18, 2019, WeWork cofounder Adam Neumann was working out of his 6,000-square-foot Gilded Age triplex off Gramercy Park when he got a text alert on his iPhone. The Wall Street Journal had just published an explosive article chronicling what it said was his reckless management of the coworking start-up, the era’s preeminent unicorn. Neumann is dyslexic, and reading is a challenge, so advisers quickly briefed him on the story’s most troubling details: vivid accounts of his heavy drinking, marijuana use, and habit of making grandiose pronouncements like wanting to be elected president of the world, live forever, and become humanity’s first trillionaire.

The article could not have arrived at a more perilous moment. Two days earlier, the We Company, WeWork’s parent, announced that it was delaying its IPO after investors universally rejected the offering, even when WeWork slashed the valuation by 75 percent, to between $10 and $12 billion. In the run-up, a string of high-profile executives had walked out the door, including the chief communications officer, the cohead of the firm’s real estate fund, and the global head of real estate partnerships. Just weeks earlier, WeWork had been privately valued at $47 billion—which was $10 billion more than the market capitalization of Ford and double the GDP of Iceland. Now, unless WeWork secured a new source of emergency funding, it would run out of cash before Thanksgiving.

For an embattled CEO running a company on life support, being the subject of a takedown by the business paper of record would mean instant career death. But Neumann, characteristically, assured colleagues that the article was not much more than a speed bump. He controlled 65 percent of the stock and had the power to fire the board of directors if the board moved against him. (So confident was Neumann of his job security that he once declared during a company meeting that his descendants would be running WeWork in 300 years.)

WeWork executives had long grown accustomed to Neumann’s belief that the laws of economics—even reality itself—didn’t apply to him. It was in the nature of unicorns that they bent reality, and that certainly had been true of WeWork. Fueled by $12 billion of venture capital and debt, Neumann grew WeWork in less than a decade from a single coworking outpost in SoHo into a 12,500-employee company with 500,000 users in 111 cities across 29 countries. But in 2018, WeWork had lost $2 billion and had a highly questionable business model—the company signed long-term leases and sublet space to freelancers and corporations on a short-term basis. Its valuation somehow kept rising.

The company’s valuation put Neumann’s net worth at $4.1 billion—and his spending more than kept pace. “It was Succession craziness,” a colleague said. Neumann was chauffeured around in a $100,000-plus Maybach sedan and traveled the world on a $60 million Gulfstream G650. As reported in the Wall Street Journal, he and his wife, Rebekah Paltrow Neumann—Gwyneth’s first cousin—spent $90 million on a collection of six homes that included the Gramercy condo, a 60-acre estate in Westchester County, a pair of Hamptons houses and a $21 million mansion in the Bay Area that features a room shaped like a guitar. They employed a squadron of nannies for their five children, two personal assistants, and a chef. “Adam went through money like water,” a former executive said.

Source: Vanity Fair

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  1. November 21, 2019

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