WeWork’s future comes down to Masayoshi Son vs. Adam Neumann

SoftBank founder Masayoshi Son (L) and WeWork founder Adam Neumann.Getty ImagesFor years, SoftBank CEO Masayoshi Son has been WeWork CEO Adam Neumann’s biggest champion, praising his drive to expand and eccentric personality. »Masa turns to me and asks, ‘In a fight, who wins — the smart guy or the crazy guy?' » Neumann said in an interview with Forbes in 2017. « I say, ‘Crazy guy,’ and he looks at me and says, ‘You are correct, but you and [co-founder] Miguel [McKelvey] are not crazy enough.' »Now Son, who has invested billions of dollars in WeWork, is leading the brigade to remove Neumann because he has been too crazy, according to people familiar with Son’s thinking.The falling out between the two men didn’t happen overnight, said the people, who asked not to be named because the discussions between SoftBank and WeWork are private. SoftBank has been consistently frustrated with Neumann’s tendency to brush off advice, from pushing forward with an IPO to using phrases in WeWork’s S-1 such as « elevate the world’s consciousness » — a phrase SoftBank urged Neumann to eliminate, to no avail, said two of the people. There are other instances of Neumann ignoring SoftBank, said the people, who declined to offer further details at this time.The revelation that Neumann may have transported marijuana across international waters, as documented in The Wall Street Journal, also has contributed to Son moving against Neumann in recent days, said the people.WeWork views Son’s turn against Neumann in a more practical light, seeing the move as SoftBank’s best chance at delaying an IPO, according to people familiar with the matter. SoftBank invested $2 billion in WeWork in January at a $47 billion valuation. Going public would force SoftBank to write down its investment, which could lead to « large volatility » in SoftBank’s business in the near term, with operating profit taking a hit of 15% if WeWork’s IPO were to be valued at $20 billion, according to analysts at research firm Bernstein.Installing a new CEO in place of Neumann that would listen to Son could delay an IPO indefinitely. While WeWork has set up $6 billion in loans as a condition of going public with JPMorgan and other banks, the terms of the loan agreement can be modified, one of the people said. SoftBank could also invest privately in WeWork if it needs more capital, the person said. WeWork has said it plans to go public before the end of the year.Still, SoftBank seemed on board with WeWork’s plans to go public as recently as last week, when SoftBank planned to invest about $1 billion in WeWork stock to support a public offering, another person said. That suggests a change of heart happened recently, perhaps spurred by growing discontent among limited partners in the Vision Fund, such as Saudi Arabia’s Public Investment Fund, which contributed $45 billion to the $100 billion Vision Fund.While Son and Softbank president Ron Fisher have consistently pushed to invest in WeWork, many others with a voice within Softbank and its associated entities have viewed the company with more skepticism, including Rajeev Misra, CEO of SoftBank Investment Advisers, who heads up the Vision Fund, one of the people said. Misra couldn’t immediately be reached for comment.Some WeWork board members hope to gain more clarity on SoftBank’s thinking at an upcoming board meeting, which hasn’t yet been scheduled and won’t happen on Monday, two of the people said. Neumann has allies on the board and has the right to remove the board in its entirety as a provision of his chairman status and majority voting shareholder.

Source: CNBC

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