Behind the fallout from WeWork’s troubled IPO

Nearly $40 billion of value vaporized in one of corporate America’s most spectacular meltdowns.
Book Excerpt-Cult of We
“The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion,” by Eliot Brown and Maureen Farrell
Courtesy of Penguin Random House

Subscribe to Fortune Daily to get essential business stories straight to your inbox each morning.

In January 2019, WeWork landed a new investment that valued it at $47 billion, making it worth more than every startup in the country save for Uber. Its chief executive, Adam Neumann, was lionized as the archetype of the modern-day “visionary” founder. But by the fall of 2019, Neumann was out as CEO, and WeWork was on the verge of bankruptcy, grappling with whether it could raise rescue financing to even pay for employee layoffs to keep going.

The main catalyst for the near implosion of WeWork—and with it nearly $40 billion of value on paper—was its attempted initial public offering. As the IPO date ticked closer, investors became increasingly wary of the company as it revealed its financials and its questionable corporate governance practices.

In September 2019, WeWork, at the urging of bankers, decided to “pause” its IPO, a key step in one of the more dramatic implosions in business history.

But before the swift unraveling of WeWork—the office-space–subleasing company that was months before hailed as a tech company worth $47 billion—there were days of tense conversations between Neumann, his senior executives, and bankers, including JPMorgan CEO Jamie Dimon, about whether Neumann could remain in power. 

The backdrop to all these conversations was that because of his voting power over the company, Adam Neumann himself had full discretion over whether he would walk away and give the company a chance at survival, or whether he would fight and risk losing everything. He had been handed the right to make such decisions almost unilaterally. 

In the excerpt below, we explore the final days of Neumann’s WeWork as some of its top executives and advisers delicately tried to persuade him to step aside.  

Authors Maureen Farrell and Eliot Brown
Courtesy of Crown

The next morning, Monday, Sept. 16, Jen Berrent and Artie Minson met in the lobby of JPMorgan headquarters at 383 Madison Avenue. The two longtime Neumann deputies were due to meet with Mary Callahan Erdoes and Noah Wintroub soon, but they needed to get on the same page.

They sank into chairs in the black-and-white–tiled lobby of the octagonal building—one built for Bear Stearns before its rapid collapse—which was adorned with screens flashing JPMorgan marketing materials. It had been a rough couple of weeks for the two senior WeWork executives. Berrent, normally unflappable, felt a constant cloud of anxiety as things began to look increasingly bleak for the IPO.

Soon after they began talking, they both realized it was time to acknowledge reality. Things weren’t going well. Their ship was taking on water faster than they could bail it out, the two agreed. Both longtime Neumann defenders had lost faith in him.

WeWork had become a laughingstock. The corporate governance problems, the investor meetings where Neumann’s pitches fell flat, Neumann’s inability to stay on script—it was all too much. Adding to the pressure was the forthcoming Wall Street Journal story that looked as though it would highlight Neumann’s erratic leadership. If WeWork went ahead with its road show and then the Journal’s article on Neumann came out, it could be a disaster. WeWork might have to pull out of its IPO plans at the last minute. That could be a hugely damaging event, preventing the company from ever coming back to try again, Minson worried. Berrent had other concerns. Neumann’s inability to stay on message when talking with investors presented a huge legal liability; they could be sued if it happened during the road show, she feared.

A glitzy video wasn’t going to save this. It was time to pull the plug before they reached the point of no return, the two concluded. WeWork wasn’t going to be able to pull off its IPO.

It wasn’t their decision to make, but they needed to tell others. The two zipped up the JPMorgan elevator to meet with Erdoes and Wintroub. In Erdoes’s conference room atop the office tower, they outlined their discomfort with Neumann’s recent erratic behavior and their fears about the IPO.

Before they got far, though, Erdoes and Wintroub offered a new wrinkle. A junior banker from Goldman Sachs who was present the prior evening at the road show taping told the IPO team that Neumann had smoked pot during the taping—a wildly irresponsible move on the cusp of an IPO, if true. Taken with the Journal’s marijuana anecdote, it could even invite legal questions for the bank and its ability to take WeWork public.

Minson and Berrent were exasperated but not surprised. They all agreed that Neumann needed to be persuaded to call off the IPO. Berrent and Minson decided to call Neumann. He should come to the bank, Berrent told him.

When he arrived, Neumann was already furious—upset they were meeting without him.

Minson quickly took Neumann aside to question him about the previous night. Were you smoking pot while you were filming the video? he asked. Neumann vehemently denied doing so.

“No,” he told Minson—absolutely not. Minson was skeptical.

Wintroub asked the same question inside the conference room. Neumann looked at Wintroub directly and told him he had not smoked pot while he was filming.

“I swear on my life and my children I would never do that,” Neumann told him. (Subsequently, multiple others present at the filming backed up Neumann’s version: They didn’t think he had smoked marijuana that night.)

They moved on. Neumann wanted to highlight some progress. He insisted everyone watch the video he had filmed through the marathon session the day before. The result was “amazing,” just watch, he told the group.

But as they watched the video together with Neumann in JPMorgan’s office, Neumann’s words rang hollow. The man atop WeWork, who was once able to hypnotically paint a picture of an empathetic global business that would transform how people worked and lived, was coming off as manic, unhinged, and slightly incoherent. For Minson, Berrent, and Wintroub, it was as if Neumann had broken the fourth wall—the invisible barrier that separates actors from their audience. They could at once clearly see the weakness of his theatrics alongside his delusions that it was a riveting performance. While his dysfunctional behavior and antics had caused resentment in each of them at different times over the past few months, the video was especially painful.

The team told him what they’d discussed. Their recommendation was to stop the IPO—for now. They could get temporary financing and wait a month or two—or more, they said. With more time, they could figure out how to better cast the company—to somehow win over investors who viewed the company as toxic.

Then Erdoes—who had devoted much of her summer to Neumann and WeWork—said out loud a thought that had popped into the minds of most every senior person involved with the IPO. Maybe it would be best for WeWork if you aren’t the CEO, she said. Many potential investors don’t think you should be in that role, she told him. The focus of all the problems, the investor concerns, the negative press deluge, Neumann was the tie that bound them all.

Neumann seemed struck by a train. It was hard to process. Seconds later, Minson walked in the room—he had stepped out for a minute while Erdoes was speaking—and Neumann started yelling. “Mary, tell him what you said,” Neumann said, looking back and forth between Erdoes and Minson. Erdoes recounted her suggestion, while Neumann looked on, wild-eyed in disbelief. “Do you think I should resign?” he asked Minson, incredulous.

Minson demurred, telling him it would be best if he calmed down. Neumann ran into Jamie Dimon’s office a few doors down in a panic. There, he found the chief of the nation’s biggest bank similarly aligned against him. Dimon agreed with Erdoes, the veteran bank CEO told him. Neumann didn’t know what to do. He had built WeWork. It was his company.

Eventually, Neumann calmed down. The group agreed to defer the decision for the time being. Goldman’s team, including Kim Posnett and David Ludwig, had told Neumann earlier in the day that they saw a way for the IPO to move forward. There was still a price—maybe not a great one for Neumann or WeWork—at which investors would buy in.

Neumann considered his options. Eventually, he relented and agreed to a pause. WeWork would delay the IPO for a month or two and reconvene. Neumann would remain the CEO. Neumann even became contrite. I’ll get this right and fix it all with you, Neumann told his closest advisers, showing a rare vulnerable side. It seemed like a sincere appraisal of the situation—an apology for his own mistakes.

From the book The Cult of We: WeWork, Adam Neumann, and the Great Startup Delusion by Eliot Brown and Maureen Farrell. Copyright © 2021 by Eliot Brown and MMF Creative Inc. Published by Crown, an imprint of Random House, a division of Penguin Random House LLC. All rights reserved.