It's not Facebook: WeWork learns from advertising

NEW YORK: The message to Adam Neumann was clear: you are not Zuckerberg.

Over the past month, when Neumann's grandiose plans for We Co began to crumble, the bankers began to warn that he should loosen his grip on society.

The era of Mark Zuckerburg was over, the WeWork leaders would learn it soon.

In 2012, Zuckerberg could make Facebook Inc. public while retaining extraordinary voting power. But that was then.

And this is how Neumann, co-founder of WeWork, reluctantly agreed this week to give up some of his powers.

The question now: will that suffice? The expected valuation of WeWork has already fallen by more than half, some 70 billion US dollars.

On Friday morning, Neumann's company hastily filed a revised prospectus for an initial public offering. This one will test not only WeWork and his guru-CEO, but, in many ways, a whole generation of people who spend money. start-up costs.

In just a few weeks, WeWork's IPO has grown from one of the most anticipated deals of the decade to perhaps one of the most feared.

Despite growing skepticism about WeWork's business prospects, Neumann has resisted changes in corporate governance that would be considered standard elsewhere.

The chaos was evident Thursday and Friday, when WeWork chose a stock exchange, sent an email to the bankers and filed its new prospectus – all in about 12 hours.

Nasdaq list

Challenging skeptics – among them, some of its own backers – WeWork plans to move forward on the Nasdaq stock market.

Even Nasdaq officials did not know for sure that the company would choose the exchange until the last minute Thursday, according to people close to the case.

The emails were flying in the night. The new prospectus was published shortly after 6 am Friday.

Now, another deadline is imminent: September 27, the Friday preceding Rosh Hashanah, the Jewish New Year.

Neumann should observe the holidays and not communicate for several days, said people familiar with WeWork. WeWork representatives did not respond to a request for comment.

Neumann did not get to where he is, by sharing, with one of the most prominent startups of the decade.

But in a new prospectus, WeWork revealed that Neumann would have less power via an unusual class of high voting shares.

Now, leaders must convince investors that their company – which has raised US $ 12 billion since its inception and has never made a hundred profits – is worth billions on the stock market.

Friday night, we did not know if they could start marketing the stock via a roadshow from Monday, as many had expected.

Value of 65 billion US dollars?

What WeWork could look for in the open market is not clear either. Only a few months ago, some bankers whispered that its value could reach $ 65 billion. Now this figure has dropped to 15 billion US dollars.

Beyond a page or two of the steps WeWork would take to strengthen its corporate governance practices, Friday's amended prospectus did not change much from the first one in August.

The dedication, even the second time, is pure Neumann:

AT THE ENERGY OF US –

GREATEST ONE OF US

BUT IN THE INTERIOR OF EVERYONE

Among other things, the company will reduce the voting advantage that gives Neumann the power to control the board of directors, and no family member will be allowed to sit on the board of directors.

WeWork will also announce the appointment of a Lead Independent Director by the end of the year.

This move leaves a rare three-class action structure in place and Neumann still retains a majority of votes. Therefore, it is unclear to what extent the changes will appease investors and the banks in charge of managing WeWork's IPO.

Evaluation issues

Questions remain about how investors will appreciate the high-growth, money-losing office leasing business supported by SoftBank Group Corp.

The company's two main financial advisors – JPMorgan Chase & Co and Goldman Sachs Group Inc – have already expressed concern about the continuation of an IPO worth around US $ 15 billion, according to people informed by discussions.

Seeking to save the IPO and limit its disadvantages, SoftBank is in talks to buy about $ 750 million of additional shares in the offer, said the population.

The board will have the opportunity to remove the CEO and the updated prospectus contains a clause stating that Neumann's wife, Rebekah – listed as founder and brand manager and responsible for the impact of WeWork – will have a role to play in the selection of any new chef. Some have criticized the changes for not going far enough.

"This is an example of behavior," said Jeffrey Cunningham, a management professor at the University of Arizona and a member of several boards, about changes to WeWork.

"Society seems to be under pressure" for the public to be made public at an inappropriate time and with a dubious governance record ".

Nevertheless, these changes have led WeWork bonds to be the biggest price winners in trading high-yield bonds during a Friday game.

An analyst at Fitch Ratings said the changes had solved many of the issues raised by the rating company when WeWork's credit rating worsened last month.

"A key element of the WeWork model is the ability to curb growth in the event of a slowdown. These governance changes increase the chances that an independent board will have the power to enforce such a decision, "said Kevin McNeil, director of Fitch, in a statement sent via email.