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Rev. Dec. 8, 2021

WeWork: But Does the Corporate Governance Work?

It was September 2019.1 Mark Schwartz, SoftBank officer and board member of the We Company
(WeWork), entered the start-up’s lower-Manhattan office for the most important board meeting of his two-
year tenure. Schwartz had been put on the board after SoftBank had invested $4.4 billion in the company in
2017. Investors had been enamored with WeWork, a multi-billion-dollar “unicorn” apparently revolutionizing
the collaborative office space market. The company was part tech company, part real estate play, and even part
cult, some said.2 Schwartz had been feeling uneasy about certain things related to WeWork’s strategic direction
for a while, but on this day, he knew he needed to speak up. Since the IPO prospectus had been filed a month
earlier, in August, investors had griped about transparency, governance, and especially disclosures around
flamboyant CEO Adam Neumann, the supposed cult leader of WeWork.

The company spent money like crazy, and Neumann seemed unfocused and slightly erratic. He also had a
habit of overpromising. Schwartz knew that to take the company public the oversight of the company had to
improve. The board had to evolve. In the past, he hadn’t spoken out, and things had seemingly worked out
quite well for WeWork’s investors. Just nine months earlier, a financing round had valued the company at
$47 billion. But the public market disagreed. The reported IPO valuation was between $8 billion and
$10 billion—a number far less than what the company had raised since 2010 from investors like Masayoshi
Son, whose SoftBank had invested $10 billion in the company.

Schwartz knew his performance before the board that day needed to be a balancing act. On the one hand,
he didn’t want to dismantle what had been successful. WeWork had been known as America’s most valuable
start-up just a few months earlier. But on the other hand, fiscal discipline, lapses in governance oversight, and
perhaps even fraud needed to be plainly discussed. And what about the charismatic young CEO? Was Neumann
ready to lead a public company? And most pressing—could WeWork do an IPO at all? The company needed
money. Schwartz knew that the time to offer proper board-level oversight had come. The company’s survival
depended on it. But what should he say? Schwartz rose to speak to the six other board members, including
Neumann. “I’ve stayed silent too long,” he began.

1 Much of the information in this case derives from Maureen Farrell and Eliot Brown, “The Money Men Who Enabled Adam Neumann and the

WeWork Debacle,” Wall Street Journal, December 14, 2019, https://www.wsj.com/articles/the-money-men-who-enabled-adam-neumann-and-the-

wework-debacle-11576299616 (accessed Feb. 22, 2021).
2 Jamie Mah, “The WeWork Downfall and the Cult-Like Figure at the Center of It All,” Medium, November 13, 2019,

https://medium.com/swlh/the-wework-downfall-and-the-cult-like-figure-at-the-center-of-it-all-d9002ca87e6d (accessed Feb. 22, 2021).

This public-sourced case was prepared by J. Yo-Jud Cheng, Assistant Professor of Business Administration, and Stephen E. Maiden (MBA ’01), Case
Researcher. It was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Mark
Schwartz’s thoughts and actions in this case are either based on publicly available information or were created by the authors for pedagogical reasons.
Copyright  2021 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an email to
[email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by
any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. Our goal is to publish materials of the
highest quality, so please submit any errata to [email protected].

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 Page 2 UV8410

WeWork’s Early Days

The company had started innocently enough. Neumann and his friend Miguel McKelvey first gained
success after the Great Recession by starting a small property leasing business in Brooklyn. In 2010, they opened
an office in SoHo and a grander vision began to take shape. The founders created a collaborative coworking
space that could be leased to entrepreneurs on a short-term basis. WeWork offices were beautifully designed
and furnished with a simple yet elevated aesthetic, each tailored to its particular location.3 The spaces offered
an array of shared desks, furnished private offices, and meeting rooms that could be rented on a flexible basis
(down to the minute, by the day, or for months at a time) without the need for a long-term lease, and featured
technological infrastructure such as high-speed Wi-Fi and access to printers and office supplies. WeWork spaces
also offered extensive amenities to foster collaboration and community, with complimentary refreshments in
fully stocked kitchens, stylish common areas and lounges, and professional and social events such as happy
hours and lunch-and-learns.4 Some locations featured espresso bars with baristas, screening rooms, golf
simulators, swimming pools, and wellness clubs.5 The company described its business model as “space-as-a-
service” and sought to take advantage of growth in globalization, urbanization, independent work, and the
sharing economy.6 WeWork started by catering to freelancers, start-ups, and small businesses in New York and
San Francisco, and then expanded across the United States and internationally, eventually adding enterprise
clients and memberships that allowed access to any location in WeWork’s growing network of spaces.

Neumann showed his skill at fundraising early on. He spoke to investors enthusiastically about the changing
workforce and about how his “We”-branded business would offer office rentals, housing, banking, and business
services. Office rentals weren’t a particularly new idea—companies like Regus had been offering business
lounges, conferencing facilities, and shared office space since 1989. But Neumann captivated investors,
customers, and employees with his enthusiastic optimism. He offered sermons about community and mission.
Much later, in the company’s IPO document, he wrote, “Our mission is to elevate the world’s consciousness.”
Everyone ate it up, including Silicon Valley.

In 2012, Neumann caught the attention of a partner at famed venture capital (VC) firm Benchmark Capital.
They didn’t love the business, but they loved Neumann. And they were impressed by the business model of
leasing long term and charging higher short-term rates to tenants. Early-stage tech investors used to investing
in years of negative cash flow were heartened that WeWork promised the ability to quickly generate profits.
Soon, the money began to flow. 2011 to 2014 featured a flurry of deals at escalating valuations. DAG Ventures
was first to invest $1 million. MassMutual, Benchmark, and Fidelity invested at an $80 million valuation.
JPMorgan Chase & Co. (JPMorgan), Harvard, and others invested at a valuation of $1.3 billion. T. Rowe Price
invested at $4.6 billion. Then Fidelity contributed to another round of funding at $9.8 billion. One venture
capitalist commented about Neumann, “He was the most charismatic pitchman I ever saw.”7

Neumann was known to be a little bit crazy, but crazy was almost applauded by investors. In one instance
in 2015, Neumann invited John Zhao to a party while Zhao’s China-based Hony Capital Ltd. was considering
investing in a round that would push WeWork’s valuation over $16 billion. On the rooftop of the 27-story Wall
St. building, Neumann led a round of tequila shots and then picked up a fire extinguisher and sprayed everyone
(including Zhao) with white foam. Did the wild behavior scuttle the deal? Hardly. The deal closed and Zhao

3 The We Company SEC Form S-1, 2019, https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm (accessed

Feb. 22, 2021).

4 “What Kind of Events Does WeWork Host at Their Spaces?,” WeWork website, https://help.wework.com/s/article/en-us-articles-212045546-

What-kind-of-events-does-WeWork-host-at-their-spaces?language=en_US (accessed Feb. 22, 2021).

5 “10 WeWork Spaces You Have to See to Believe,” WeWork, July 16, 2019, https://www.wework.com/ideas/office-design-space/wework-spaces-

you-have-to-see-to-believe (accessed Feb. 22, 2021).

6 https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm.
7 Charles Duhigg, “How Venture Capitalists Are Deforming Capitalism,” New Yorker, November 23, 2020,
https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism (accessed Feb. 22, 2021).

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[email protected] or 800-988-0886 for additional copies.
 Page 3 UV8410

joined WeWork’s board in 2016. Later Zhao’s son got a job at WeWork. While all investors believed in the
vision and optimism of Neumann, none committed more than SoftBank and its leader, Masayoshi Son.

Neumann Meets Masayoshi Son

SoftBank was originally founded in 1981 by 24-year-old Son as a software distributor. When SoftBank went
public in 1994 with a valuation of $3 billion, it was Japan’s largest publisher of computer and technology
magazines and producer of trade shows. Over the years, SoftBank became a holding company and began to
make investments. The most successful investment was $20 million placed into Jack Ma’s Alibaba in 2000,
which grew to $60 billion when Alibaba went public in 2014. Son had decided to invest in Ma within minutes
of meeting him because of the “sparkles in his eyes.” In 2017, Son launched the massive $100 billion Vision
Fund to make tech, energy, and financial investments. Nearly half the capital in the Vision Fund came from
Mohammad bin Salman, the crown prince of Saudi Arabia, buttressed by money from high-profile backers such
as Apple, Qualcomm, UAE-based Mubadala Investment Company, Saudi Arabia’s PID public fund, Foxconn,
and Foxconn-owned Sharp.8

It was at a January 2016 investor event called Startup India where Son first saw Neumann speak onstage.
This was the same year that Ma and his wife Cathy invested approximately $25 million in WeWork. WeWork
had a $12 billion valuation at the time, but fewer than 75 locations, none of which were in India. On stage,
Neumann said at one point, “I’m surprised [by] the amount of talk I heard about valuation and raising money
and bubbles and building big companies. That is not the goal. The goal is finding something that you truly love.
Make sure it has intention behind it. Make sure it’s going to make the world a better place.” That evening,
Neumann joined Son for dinner.

Son initially played coy and passed on several funding rounds, but in December 2016, Son asked for a tour
of WeWork’s New York headquarters. When Son arrived, he told Neumann that he only had 12 minutes.
Neumann raced to show what he could and then Son asked Neumann to accompany him in his car so they
could talk. Son took out an iPad and wrote out the terms for a $4.4 billion investment in WeWork. He drew
two lines at the bottom, signed one, then asked the 37-year-old Neumann to sign the other. Later Neumann
recalled, “When Masa chose to invest in me for the first time, he only met me for 28 minutes.”9 Son’s investment
was announced in August 2017. The goal was to accelerate WeWork’s growth; to grow as quickly as possible.
As fast as Alibaba.

With pressure from Son, Neumann doubled his growth plans, straining the bounds of the organization.
Opening a new location involved a complicated set of steps: negotiating a lease, getting permits, designing the
space, constructing the project, tailoring the layout, marketing to the individual market, and finding tenants. In
the frenzy to grow, mistakes were made. When his lieutenants urged Neumann to slow down, he berated them
as “B players” and stripped their job titles. Neumann did not want to let down Son, who had become a mentor
and friend. “Masa is a Jedi,” commented Neumann, “and as a Jedi, he has a lot of superpowers.”10

8 Danny Crichton and Arman Tabatabai, “The First Vision Fund Is Officially Done Investing (and Spent $100M Every Day of Its Existence),”

TechCrunch, May 18, 2020, https://techcrunch.com/2020/05/18/the-first-vision-fund-is-officially-done-investing-and-spent-100m-every-day-of-its-

existence/ (accessed Feb. 22, 2021).
9 Katrina Brooker, “WeFail: How the Doomed Masa Son–Adam Neumann Relationship Set WeWork on the Road to Disaster,” Fast Company,

November 15, 2019, https://www.fastcompany.com/90426446/wefail-how-the-doomed-masa-son-adam-neumann-relationship-set-wework-on-the-

road-to-disaster (accessed Feb. 22, 2021).
10 https://www.fastcompany.com/90426446/wefail-how-the-doomed-masa-son-adam-neumann-relationship-set-wework-on-the-road-to-disaster.

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 Page 4 UV8410

Growth Forever

By 2018, WeWork had become New York’s largest private landlord.11 WeWork was opening a new location
practically every day and adding hundreds of employees each month, compensated partially in stock (see
Exhibit 1 for WeWork’s locations over time).12 Son told Neumann not to be proud of WeWork’s lean sales
staff, but to aim to have 10,000 salespeople (when the entire company had fewer than 10,000 employees). Once
SoftBank invested, it seemed like no other investors were needed. Son cheered the growth despite some
misgivings from his internal SoftBank analysts, who hadn’t even wanted to invest in a real estate play in the
first place. With increasing valuations and seemingly endless money, WeWork went on a buying spree, acquiring
17 companies, including tech start-ups to manage construction projects and help marketing. Not all the
investments seemed synergistic. WeWork bought event-planning site Meetup.com, search-engine-optimization
company Conductor, and the Flatiron Academy coding school. After surfing with big-wave legend Laird
Hamilton in Hawaii, Neumann decided to use company funds to invest $32 million in Laird Superfood. Despite
members’ questions around the disparate acquisition strategy, the board approved expenditures of more than
$500 million in two years on tech-related companies. Neumann began to expand the vision for WeWork still
further, reimagining education, fitness, social gatherings, sports, and leisure. He envisioned verticals WeWork,
WeLive, WeLove, WeCongregate, WePlay, and WeGrow.

The company’s growth was staggering. For the first seven years, the company doubled revenues annually.
The fundraising was staggering too. It took a lot of money to fund that kind of growth. Since its founding,
WeWork had raised $10.7 billion in nine separate funding rounds (Exhibit 2).13 But questions began to arise
for those paying attention. Neumann had a habit of overpromising and underdelivering—or worse. A fall 2014
investor pitch he made showed a projection of a $2.4 million operating profit for the year. But at year-end, just
three months later, the company notched an operating loss of $88 million on $74 million of revenue. In 2015,
Neumann told the Wall Street Journal that WeWork was profitable and didn’t need additional funding pre-IPO.
That year, the company made $187 million in revenue but lost $233 million. By the time of the fall 2019 board
meeting, WeWork had had only one profitable year in its history, when it made $1.7 million in 2012 (see
Exhibit 3 for WeWork’s financial performance).

Some investors wondered about WeWork’s path to profitability. Was there one? When Benchmark first
invested, Bruce Dunlevie, the VC firm’s representative on WeWork’s board, admitted to a partner that he
wasn’t sure the company would ever become profitable.14 The business model was simple enough. Rent office
space, divide it up, and sublease at a higher per-unit cost. For years, WeWork had bled cash chasing growth,
but there were questions about whether the model could be profitable even at a single location.15 It was also a
model that could be copied. And it was. Big landlords began to launch their own coworking efforts around the
world.16 Other coworking entrepreneurs saw WeWork entering markets and opened their own location just a
few blocks away, then undercut WeWork on price.17 In 2017, China’s UrWork raised $58 million from Alibaba’s
Ant Financial unit and other investors, essentially copying WeWork’s model.18 What did that mean for future
pricing power? Would there be enough demand to keep occupancy rates high? Did WeWork have a sustainable
competitive advantage?

11 https://www.fastcompany.com/90426446/wefail-how-the-doomed-masa-son-adam-neumann-relationship-set-wework-on-the-road-to-disaster.
12 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.
13 “The We Company,” Crunchbase, https://www.crunchbase.com/organization/wework/investor_financials (accessed Feb. 22, 2021).
14 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.
15 “WeWork Business Model (And Why It Flopped),” DayTrading.com, June 16, 2020, https://www.daytrading.com/wework-business-model

(accessed Feb. 22, 2021).

16 Peter Grant, “WeWork’s Latest Threat: Old-School Landlords Trying to Copy WeWork,” Wall Street Journal, September 10, 2019,

https://www.wsj.com/articles/weworks-latest-threat-old-school-landlords-trying-to-copy-wework-11568127640 (accessed Feb. 22, 2021).

17 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.
18 Jillian Yue, “China’s WeWork Copycat UrWork Raises $58M from Ant Financial Unit and Others,” China Money Network, January 18, 2017,

https://www.chinamoneynetwork.com/2017/01/18/chinas-wework-copycat-urwork-raises-58m-from-ant-financial-unit-and-others (accessed Feb. 22,

2021).

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 Page 5 UV8410

Neumann Tightens His Grip

Neumann was becoming fabulously wealthy on paper ($3 billion by 2015), but raising money diluted the
founders’ financial ownership. It also diluted control. Neumann, who had cultivated an image of new-age
enlightened leader, did not always seem to practice what he preached. In one meeting, an executive recalled
that Neumann spoke openly about his goal to make WeWork into a “monopoly.”19 When it was mentioned
that monopolies were illegal and implied unfair business practices, Neumann shrugged and said in the future
he’d call it something else. When it came to company control, Neumann’s worst impulses were on display.

By 2014, Neumann was getting so much investor interest that he declared he’d only work with investors
willing to give him a majority of voting control over the company’s board.20 When T. Rowe Price invested in
two of WeWork’s funding rounds, Neumann restructured the stock so that his shares had 10 times the voting
control of normal shares, giving him long-term voting control. In the same deal, an entity he controlled sold
$40 million of stock, and he sold an additional $80 million in 2015.

While most went along with these changes, Benchmark’s Dunlevie resisted temporarily, warning Neumann
that absolute power corrupts absolutely. Early-stage investors did not like seeing the founder pull money out
before they did in an IPO, and Dunlevie had a history of walking away from a guaranteed payday over a principle
(in a partnership with Toys“R”Us earlier in his Benchmark career, Dunlevie walked away from a big potential
payout after middle management subverted his ideas). Later, Dunlevie’s daughter was hired by WeWork. By
2017, Benchmark partners were concerned enough by Neumann’s actions that they flew to see him in
Manhattan. Dunlevie, despite his pushback, was more deferential to Neumann than other Benchmark partners
who worried that Neumann was acting like Travis Kalanick, the wild CEO of Uber (another Benchmark
investment), and needed to be reined in. They voiced their concerns to Neumann, but nothing meaningful
changed. T. Rowe Price also became alarmed. “We saw the valuation rise and the corporate governance erode,”
said co-head of global equity at T. Rowe Price. When SoftBank invested, T. Rowe Price sold as much of its
investment as possible to Son’s firm.

A Captive Board

Like most other venture-backed private companies, WeWork’s board started small and then grew over time
with the addition of investors. It was typical for outside investors to negotiate a board seat as a contingency in
the term sheet for an investment (alternatively, some investors negotiated for a seat as a board observer who
could participate in board discussions but did not have formal voting rights). Over time, the board added VC
representatives such as Benchmark’s Dunlevie and Hony Capital’s Zhao. Later, Son appointed two top
SoftBank lieutenants—SoftBank vice chair Ron Fisher and Schwartz, a former Goldman Sachs partner—to sit
on the board. Like public company directors, directors of private companies were also bound by fiduciary
duties. For directors who also represented their VC firms, these duties could at times create conflicts because
of their obligations both to the company in which they invested and to their VC fund.

Directors of private companies were often more deeply involved than public company directors in day-to-
day company operations. For several years, Schwartz was a regular in the WeWork office, working out of a
small room near Neumann and other top executives.21 But Neumann’s voting stock also meant that he could
pack the board and replace dissenters. He had always favored hiring friends and family. His wife Rebekah was

19 https://www.fastcompany.com/90426446/wefail-how-the-doomed-masa-son-adam-neumann-relationship-set-wework-on-the-road-to-disaster.
20 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.
21 Eliot Brown, “How Adam Neumann’s Over-the-Top Style Built WeWork. ‘This Is Not the Way Everybody Behaves,’” Wall Street Journal, September

18, 2019, https://www.wsj.com/articles/this-is-not-the-way-everybody-behaves-how-adam-neumanns-over-the-top-style-built-wework-11568823827

(accessed Feb. 22, 2021).

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 Page 6 UV8410

hired as WeWork’s chief brand officer, despite misgivings from the board. This meant that functionally,
WeWork’s board operated more like an advisory board than a typical corporate board with strong oversight.
For instance, the board signed off on Neumann’s use of $13 million of WeWork’s funds to invest in a company
that made artificial wave pools,22 and let Neumann conduct an expensive renovation of its corporate
headquarters, adding a sauna and ice bath in his office. Neumann paid three times the normal price the company
paid for renovations to get prime real estate in San Francisco, cutting through the floor to make room for a
staircase and adding a fitness club.

While Dunlevie had pushed back against some of Neumann’s most brazen moves, he never pushed too
hard. One of Dunlevie’s colleagues at Benchmark scoffed at the idea that he should have stepped down from
the board, explaining that Benchmark had “invested when WeWork was worth, like, eighty million dollars, and
now it’s worth fifteen billion, and we should walk away? Or, even worse, complain?”23

Neumann regularly missed board meetings throughout 2018, sending a delegate instead. At the meetings,
directors discussed the pace of growth among other issues. A top WeWork executive who participated in board
meetings said, “If you review the minutes of our board meetings, you would see that never has there been a
board vote that wasn’t unanimous. There was never a budget plan, or a growth plan, that wasn’t approved
unanimously. If board members had concerns, they never once officially said them.”24

Neumann’s Leadership

The six-foot-five, long-haired Adam Neumann was charismatic, frenetic, and full of platitudes like, “If you
are open-minded and you let the universe come in, you never know where things might go,”25 and “Success is
not just making money. Success is happiness. Success is fulfillment; it’s the ability to give.”26 Top employees
were told to attend weekly sessions with a guru. Recreational drug use and sex among staff members at the
headquarters was commonplace, and condoms routinely were found in stairwells. Neumann smoked marijuana
at the office.27 While many investors appreciated Neumann’s enlightened style of leadership, they seemed most
impressed by his track record of doubling WeWork’s revenues and its valuation every year.

During the time WeWork was valued at $5 billion, Neumann had flown private. But in 2018, he wanted an
upgrade. Despite board of director and investor concerns, Neumann used $63 million to purchase a brand-new
Gulfstream G650ER that had 16 seats and two lavatories—one for the crew. In more recent years, the board
allowed Neumann to personally buy stakes in buildings that he would then lease back to WeWork. Related
party transactions like this were frowned upon by Wall Street, and had to be plainly disclosed in SEC filings by
publicly traded companies because of the possibility of a conflict of interest.

Eventually Schwartz, Dunlevie, and Langman pushed Neumann in board meetings to commit to a timeline
for an IPO. Some of the board members reasoned that an IPO would bring public market oversight to a
situation they had trouble reining in. But that same year, Son dangled a potential further $20 billion investment,
including the buyout of existing investors. Son wanted a majority stake in the company.

22 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.
23 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.
24 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.
25 “Adam Neumann Quotes,” Citatis, https://citatis.com/a7917/0c4dd/ (accessed Feb. 22, 2021).
26 “‘Success Is Not Just Making Money. Success Is Happiness. Success Is Fulfillment; It’s the Ability to Give,’” quote by Adam Neumann on 9quotes,

https://www.9quotes.com/quote/adam-neumann-655506 (accessed Feb. 22, 2021).

27 https://www.newyorker.com/magazine/2020/11/30/how-venture-capitalists-are-deforming-capitalism.

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 Page 7 UV8410

Pressure Builds for an IPO

In December 2018, SoftBank’s stock plunged—primarily due to market issues—and Son decided that the
potential $20 billion investment could only be $2 billion. Over breakfast in Hawaii, Son and Neumann agreed
that the new round would be raised at a $47 billion valuation, with $1 billion used to buy shares from previous
investors, allowing some on the board to sell. Executives and board members like Schwartz knew the $6 billion
on the balance sheet at the beginning of 2019 wouldn’t last. In January 2019, Neumann told CNBC that the
new funding from SoftBank (which brought its total investment in WeWork to $10 billion) was “above and
beyond what we need to fund the company for the next four to five years.” But the math didn’t work. While
he had always put off an IPO due to the intrusive scrutiny of public market investors and analysts, Neumann
began to have a change of heart.

Investment banks acted as both enabler and seductress, wooed by the potential fees of a major IPO.
JPMorgan and Goldman Sachs were both investors. Neumann referred to JPMorgan’s CEO Jamie Dimon as
his personal banker and had a $500 million personal credit line from JPMorgan and other banks.28 Goldman
Sachs bankers urged growth in pitchbooks and showed a slide with WeWork’s path to a trillion-dollar market
capitalization. Time and again, JPMorgan, Dimon, and other bankers championed Neumann’s business model
as they battled for the coveted IPO assignment that could bring prestige and yield millions in fees.

Stock exchanges, lured by the cachet and revenues that would come with a blockbuster public listing, also
angled to get in on the action. With his listing decision on the line, Neumann invited the leaders of the New
York Stock Exchange (NYSE) and NASDAQ to one of his Hamptons homes to solicit their support for one
of his pet causes: environmental sustainability. NYSE President Stacey Cunningham offered to eliminate single-
use plastic products in its cafeteria; NASDAQ CEO Adena Friedman offered to create a new stock market
index, the “We 50,” committed to sustainability.29 Neumann went with NASDAQ.

Due to the structure of VC funds, investors were motivated to grow and scale a company over a constrained
time period, with the end goal of exiting their investment through a sale or IPO.30 The potential windfall offered
by an IPO generated a strong incentive to see the public offering through. Although the board (shown at the
time of the IPO in Exhibit 4) noted weaknesses in the company’s operations and leadership, momentum for
an IPO was growing, and pressure was mounting to clear any obstacles that stood in the way (directors’ stock
holdings are shown in Exhibit 5).

After turning it over in his mind, Neumann soon became enthusiastic about the prospect of going public.
He had been granted substantial stock options that could only be exercised following an IPO.31 Just that year,
Pinterest ($12.7 billion valuation), Zoom ($9.2 billion), CrowdStrike ($6.7 billion), and especially Uber
($82.4 billion) had all raised large sums of money at significant valuations. Success seemed inevitable. Executives
and employees, paid heavily in equity, also saw dollar signs. No one wanted to stand in the way with a looming
payday on the horizon.

28 https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm.
29 Maureen Farrell, Liz Hoffman, Eliot Brown, and David Benoit, “The Fall of WeWork: How a Startup Darling Came Unglued,” Wall Street Journal,
October 24, 2019, https://www.wsj.com/articles/the-fall-of-wework-how-a-startup-darling-came-unglued-11571946003 (accessed Feb. 22, 2021).
30 VC firms managed funds that were typically structured with a 7-to-10-year lifespan. Investments were made over the first few years and then exited

in the last few years of the fund, ideally through an IPO or acquisition. Any individual investment typically lasted four to seven years before it was
divested, with opportunities for extensions of the investment.
31 https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm.

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 Page 8 UV8410

A Company on the Brink

The first bad sign to investors was the July roadshow meeting. Neumann spoke to analysts but did not give
any real numbers. He compared the company to Amazon with its nearly $1 trillion valuation, hoping the IPO
value of $65 billion for WeWork would seem like a relative bargain. Meanwhile, a Wall Street Journal article
crowed about Neumann cashing out at least $700 million via sales and loans.32 Analysts wondered: If the
founder was selling, why should we invest? Then investors learned that early investor Benchmark had not
increased its initial investment in subsequent rounds, despite Benchmark partner Dunlevie sitting on the
WeWork board. What did Benchmark see?

In the lead-up to a potential IPO, it was typical for boards to formalize governance policies and procedures
as they prepared to comply with SEC and listing exchange requirements for public companies. Although newly
public firms were granted a transition period to meet certain governance requirements following an IPO, many
firms adopted these requirements well in advance to instill confidence with prospective investors.

On August 14, 2019, WeWork filed its IPO prospectus (also referred to as the “S-1” or “registration
statement”). This represented one of the major milestones in the path toward an eventual IPO, and was the
first time the public would gain access to details about the company’s business plan, operations, and properties;
audited financial statements; data on current shareholders’ equity and executive compensation; and a list of
independent directors. The reaction was swift and ugly. Analysts saw massive losses ($900 million in the first
half of 2019) and $47 billion in lease obligations. They wondered why Neumann was to be paid $5.9 million in
stock for the rights to the word “we” in the rebranded We Company name.

Neumann’s huge voting power also raised eyebrows. In a public offering, companies could establish distinct
classes of shares that conferred different voting rights. WeWork’s offering included Class A shares, which
provided one vote per share, as well as Class B and Class C shares (nearly all owned or controlled by Neumann)
that provided 20 votes per share. The Class C shares were created through a complex restructuring that
bestowed Neumann and other executives more favorable tax treatment on future profits than for other
shareholders. In effect, Neumann would control more than 50% of the shareholder voting power, thus
maintaining the control he had amassed as the company scaled, and limiting the ability of future shareholders
to vote on issues such as director elections and the approval of mergers and acquisitions.33

Although single-class share structures were most common in public offerings, dual-class structures were
becoming increasingly prevalent (used in 28% of IPOs in 2017 and 19% of IPOs in 2018),34 particularly among
founder-led tech companies. Even so, the 20 votes per share afforded to Neumann far exceeded the voting
rights offered by most other firms’ dual-class shares. The concentration of voting power also allowed WeWork
to qualify as a “controlled company” under NASDAQ rules, thus exempting it from requirements that
mandated a majority of independent board directors and that the audit and compensation committees be
composed solely of independent directors.

External observers questioned why it was written in the prospectus that Neumann’s wife Rebekah (who he
called his “thought partner”) would be placed at the helm of a committee with two board members to pick her
husband’s successor should something happen to him within 10 years of the IPO. Key executives only learned
of this days before the prospectus was released (see Exhibit 6 for excerpts from the prospectus). While there

32 https://www.wsj.com/articles/wework-co-founder-has-cashed-out-at-least-700-million-from-the-company-11563481395 (accessed Feb. 22, 2021).

33 Share classes were a separate issue from preferred versus common stock. It was typical for venture capitalists and other investors to require shares
of preferred stock that provided liquidation preference (the right to be paid first in the event of a liquidation event) and other negotiated rights. Founders
and employees usually held what was called common stock.
34 David F. Larcker and Brian Tayan, “Venture Capital and Pre-IPO Governance: Data Spotlight,” Stanford Graduate School of Business Corporate

Governance Research Initiative, https://www.gsb.stanford.edu/sites/default/files/publication-pdf/cgri-data-spotlight-venture-capital-preipo-

governance.pdf (accessed Feb. 22, 2021).

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 Page 9 UV8410

were no federal requirements in the United States around board diversity for public companies, it was common
for boards to add directors from underrepresented groups as they prepared for an IPO (because the majority
of start-up founders and VC investors were men, the boards of private, venture-backed firms typically had little
gender diversity).35 Pundits noted that the company boasted about its culture of inclusivity yet maintained an
all-male board. They also wondered whether Neumann was fit to lead a publicly traded company. Although
many founder-led companies like Facebook and Google performed well after going public,36 leadership
transitions were common: the founder was replaced by a new CEO in nearly half (47%) of IPOs.37

Saving the Sinking Ship

By the end of August, WeWork’s valuation was expected to be less than half the $47 billion used in
SoftBank’s January financing. A few weeks later, WeWork’s board of directors gathered for what was sure to
be a long meeting. Schwartz had the attention of the entire board because the numbers were clear. WeWork
would run out of money in a few months, the second week of November. Neumann seemed open to doing
whatever was necessary to save the company. What needed to be done to salvage the IPO and regain the trust
of investors? Schwartz rose to speak. There were many issues he wanted to address.

35 “Pitchbook–All Raise: All In Women in the VC Ecosystem,” PitchBook, November 11, 2019, https://pitchbook.com/news/reports/2019-

pitchbook-all-raise-all-in-women-in-the-vc-ecosystem (accessed Feb. 22, 2021).

36 Chris Zook, “Founder-Led Companies Outperform the Rest—Here’s Why,” Harvard Business Review, March 24, 2016,
https://hbr.org/2016/03/founder-led-companies-outperform-the-rest-heres-why (accessed Feb. 22, 2021).
37 https://www.gsb.stanford.edu/sites/default/files/publication-pdf/cgri-data-spotlight-venture-capital-preipo-governance.pdf.

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 Page 10 UV8410

Exhibit 1
WeWork: But Does the Corporate Governance Work?
WeWork Locations, Cities, and Memberships

2010 2012 2014 2016 2018 Q2 2019

Locations 2 7 23 111 425 528
Cities 1 3 8 34 100 111
Memberships 450 4,000 15,000 87,000 401,000 527,000
Data sources: The We Company SEC Form S-1, 2019, https://www.sec.gov/Archives/edgar/data/1533523/
000119312519220499/d781982ds1.htm; “WeWork: Deal History,” PitchBook, https://my.pitchbook.com/profile/62181-
28/company/profile#deal-history/118473-40T (both accessed Feb. 22, 2021).

Exhibit 2
WeWork: But Does the Corporate Governance Work?
Equity Funding Rounds
(amounts in millions of US dollars)
Pre-Money
Date Round Key Investor(s) Amount Valuation
10/25/11 First VC DAG Ventures $1 N/A
7/1/12 Series A MassMutual, Benchmark, Fidelity $17 $80
5/29/13 Series B Undisclosed $40 $400
2/1/14 Series C JPMorgan Chase & Co., Harvard, Benchmark, Mort Zuckerman $150 $1,343
12/16/14 Series D T. Rowe, Wellington, Goldman Sachs $355 $4,645
7/1/15 Series E Fidelity $434 $9,800
10/12/16 Series F Legend Holdings, JANVEST Capital, Hony Capital $690 $16,210
8/24/17 Series G SoftBank $3,000 $19,500
1/8/19 Corp Fin SoftBank $6,000 $47,000*
$10,687 *post-money
Data source: “WeWork: Deal History,” PitchBook, https://my.pitchbook.com/profile/62181-28/company/profile#deal-history/118473-40T
(accessed Feb. 22, 2021).

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 Page 11 UV8410

Exhibit 3
WeWork: But Does the Corporate Governance Work?
Consolidated Results of Operations
(amounts in thousands of US dollars)

Six Months Ended

Year Ended December 31, June 30,
2016 2017 2018 2018 2019
Revenue $436,099 $886,004 $1,821,751 $763,771 $1,535,420
Expenses:
Location operating expenses $433,167 $814,782 $1,521,129 $635,968 $1,232,941
Other operating expenses — $1,677 $106,788 $42,024 $81,189
Pre-opening location expenses $115,749 $131,324 $357,831 $156,983 $255,133
Sales and marketing expenses $43,428 $143,424 $378,729 $139,889 $320,046
Growth and new market development expenses $35,731 $109,719 $477,273 $174,091 $369,727
General and administrative expenses $115,346 $454,020 $357,486 $155,257 $389,910
Depreciation and amortization $88,952 $162,892 $313,514 $137,418 $255,924
Total expenses $832,373 $1,817,838 $3,512,750 $1,441,630 $2,904,870
$(1,369,450
Loss from operations $(396,274) $(931,834) $(1,690,999) $(677,859) )
Interest and other income (expense), net $(33,400) $(7,387) $(237,270) $(46,406) $469,915
Pre-tax loss $(429,674) $(939,221) $(1,928,269) $(724,265) $(899,535)
Income tax benefit (provision) $(16) $5,727 $850 $1,373 $(5,117)
Net loss $(429,690) $(933,494) $(1,927,419) $(722,892) $(904,652)
Net loss attributable to noncontrolling interests — $49,500 $316,627 $94,762 $214,976
Net loss attributable to WeWork Companies Inc. $(429,690) $(883,994) $(1,610,792) $(628,130) $(689,676)
Data source: The We Company SEC Form S-1, 2019, https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm;
(accessed Feb. 22, 2021).

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 Page 12 UV8410

Exhibit 4
WeWork: But Does the Corporate Governance Work?
August 2019 Pre-IPO WeWork Board of Directors

Name Role Professional Experience Notable Other Boards

Adam Neumann Chairman of the Board  CEO of WeWork
Bruce Dunlevie Director since 2012  Founding Partner of  ServiceSource
(designated by Benchmark Capital International
Benchmark, Series A)  One Medical Group
 Marin Software
Ronald D. Fisher Director since 2017  Vice Chairman of SoftBank  T-Mobile
(designated by SoftBank,  CEO of Phoenix  Arm Holdings
Series G) Technologies  Brightstar Global Group
Inc.
Lewis Frankfort Director since 2014  Chairman of Flywheel  Recycle Track Systems
Sports Inc.
 Chairman and CEO of  Columbia Business
Coach School
Steven Langman Director since 2012  Managing Director of  CSM Bakery Solutions
Rhone Capital Ltd.
 Chairman of ARK  Hudson’s Bay Company
Mark Schwartz Director since 2017  Officer at SoftBank  SoftBank
 Head of Asia-Pacific  Harvard Business School
Region of Goldman Sachs  Paytm
 CEO of Soros Fund
John Zhao Director since 2016  CEO of Hony Capital  Lenovo
(designated by Hony  China Glass Holdings
Capital, Series F)

Data source: The We Company SEC Form S-1, 2019, https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm;

Eddie Small, “Behind the Curtain of WeWork’s All-Male Board of Directors,” Real Deal, August 23, 2019,
https://therealdeal.com/national/2019/08/23/behind-the-curtain-of-weworks-all-male-board-of-directors/ (both accessed Feb. 22, 2021).

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 Page 13 UV8410

Exhibit 5
WeWork: But Does the Corporate Governance Work?
Pre-IPO Stockholdings

Shares of Shares of Shares of

Class A Class B Class C
Common Common Common
Stock Stock Stock
Greater than 5% stockholders:
WE Holdings LLC 2,428,730 111,848,498 —
Benchmark entities 32,645,314 — —
JPMorgan Chase & Co. entities 18,542,307 — —
SoftBank entities 113,988,653 — —
Directors and named executive officers:
Adam Neumann (cofounder, CEO) 2,428,730 112,507,371 1,062,578
Artie Minson (co-president, CFO) — [less than 1%] —
Jen Berrent (co-president, Chief Legal Officer) [less than 1%] [less than 1%] —
Bruce Dunlevie (non-employee director) 32,645,314 — —
Ron Fisher (non-employee director) — — —
Lew Frankfort (non-employee director) [less than 1%] [less than 1%] —
Steven Langman (non-employee director) [less than 1%] — —
Mark Schwartz (non-employee director) — — —
John Zhao (non-employee director) — — —
All directors and executive officers, as a group 36,431,010 114,821,543 1,062,578
Notes: Class B common stock and Class C common stock had 20 votes per share, whereas Class A common stock had one vote per share. Adam
Neumann and Miguel McKelvey were the managing members of WE Holdings LLC. Adam Neumann had sole voting power over all the shares held by
WE Holdings LLC.
Data source: The We Company SEC Form S-1, 2019, https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm
(accessed Feb. 22, 2021).

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 Page 14 UV8410

Exhibit 6
WeWork: But Does the Corporate Governance Work?
Excerpts from Prospectus (Form S-1)

Relationships and Transactions with Adam Neumann, our Co-Founder and Chief Executive Officer
Adam has served as the Company’s Chief Executive Officer and Chairman of the Company’s board of directors since our
inception. From the day he co-founded WeWork, Adam has set the Company’s vision, strategic direction and execution
priorities. Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and
innovator, while thriving as a community and culture creator. Given his deep involvement in all aspects of the growth of
our company, Adam’s personal dealings have evolved across a number of direct and indirect transactions and relationships
with the Company. As we make the transition to a public company, we aim to provide clarity and transparency on the
history of these relationships and transactions, as well as the background to the strategic governance decisions that have
been made by Adam and the Company.
…
Voting Controls
Adam controls a majority of the Company’s voting power, principally as a result of his beneficial ownership of our high-
vote stock. Since our high-vote stock carries twenty votes per share, Adam will have the ability to control the outcome of
matters submitted to the Company’s stockholders for approval, including the election of the Company’s directors. As
a founder-led company, we believe that this voting structure aligns our interests in creating shareholder value. Adam is,
however, committed to relinquishing control at a time when he no longer maintains a significant economic interest in The
We Company and the share ownership of Adam and certain of his permitted transferees represents less than 5% of the
aggregate number of then-outstanding shares of our capital stock, at which time all of the outstanding high-vote stock
would convert to having one vote per share.
…
Succession Planning
As part of our transition to a public company, our board of directors has spent significant time planning for the transition
from a privately controlled company to a public company and put considerable thought into succession planning. In
particular, in connection with this offering we are taking measures to provide clarity as to how unexpected transitions in
our leadership might occur.
In the event that Adam is permanently disabled or deceased during the ten-year period commencing upon the completion
of this offering, a committee will be formed for the sole purpose of selecting a new Chief Executive Officer. The
composition of this committee will be as follows:
• Bruce Dunlevie and Steven Langman, who are currently members of our board of directors and members of our
compensation and nominating committee, to the extent they are then serving as our directors, will serve on this
selection committee with Rebekah Neumann (with the size of the committee fixed at two or three, as applicable);
and
• if neither Bruce nor Steven is then serving as one of our directors, Rebekah will choose one or two board members
who are serving at the time to serve on this selection committee with Rebekah.
…
Personal Loans
Adam currently has a line of credit of up to $500 million with UBS AG, Stamford Branch, JPMorgan Chase Bank, N.A.
and Credit Suisse AG, New York Branch, of which approximately $380 million principal amount was outstanding as of
July 31, 2019. The line of credit is secured by a pledge of approximately shares of our Class B common stock
beneficially owned by Adam. In addition, JPMorgan Chase Bank, N.A. has made loans and extended credit to Adam
totaling $97.5 million across a variety of lending products, including mortgages secured by personal property. None of
these other lending products are secured by a pledge of any of Adam’s shares of capital stock in the Company.
Source: The We Company SEC Form S-1, 2019, https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm
(accessed Feb. 22, 2021).

This document is authorized for use only by Carlos Alberto Camacho ([email protected]). Copying or posting is an infringement of copyright. Please contact
[email protected] or 800-988-0886 for additional copies.