Commercial Property

WeWork restructures corporate governance in bid to save IPO

Voting power of co-founder Adam Neumann to be reduced

The mooted valuation would be a sharp reduction from the $47 billion level that WeWork attained during its last private fundraising in January and less than a quarter of the $65 billion that bankers at Goldman Sachs had once pitched as a possibility.

Fri Sep 13 2019 - 16:51

WeWork announced it would appoint a lead independent director by the end of the year and reduce the voting power of co-founder Adam Neumann, bowing to investor pressure as the shared workspace provider battles to dispel scepticism ahead of its initial public offering.

The group said on Friday that it would reduce Mr Neumann’s outsize control of the company by cutting his voting rights from 20 votes per share to 10 and cancel the supervoting shares entirely in the event of his death.

We Company, WeWork’s parent, said in a filing with the US Securities and Exchange Commission that the decision was made “in response to market feedback”. The governance changes, however, still keep WeWork firmly under Mr Neumann’s control, the filing noted.

Board

WeWork also said no member of Mr Neumann’s family would sit on the board and it removed the role of Mr Neumann’s wife, Rebekah, in choosing a successor in the event of his death.

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“Any chief executive officer who succeeds Adam will be selected by our board of directors, acting as a group. We will not rely on a succession committee. Our board has the ability to remove our chief executive officer,” the filing said.

It was reported on Thursday that WeWork’s executives, investors and advisers were discussing curbing Mr Neumann’s voting power and changing Mrs Neumann’s role in succession planning.

Mr Neumann, 40, is working to keep the IPO on track even as the company’s advisers question whether public market investors will come onboard. They are trying to tempt investors with a cut-price deal that would value the lossmaking property giant as low as $15 billion (€13.52 billion).

The mooted valuation would be a sharp reduction from the $47 billion level that WeWork attained during its last private fundraising in January and less than a quarter of the $65 billion that bankers at Goldman Sachs had once pitched as a possibility. The company declined to comment beyond the regulatory filing, citing US restrictions around communications ahead of an IPO.

Inside the office space company, concern about the fate of the IPO has been heightened by a management decision to cancel an all-hands town hall meeting for employees, which had been planned for Thursday this week, and by the departure of chief communications officer Jennifer Skyler, who announced this week she was leaving for a role at American Express.

Concerns

To allay corporate governance concerns, WeWork had already promised to add a new director to its board. Mr Neumann also returned a nearly $6m payment from the company that had drawn criticism.

The property group is set to kick off its investor roadshow for the IPO on Monday and has given itself and its bankers at JPMorgan Chase and Goldman a tight deadline to complete the listing. Mr Neumann hopes to have the deal finalised this September before Rosh Hashana, so he can observe one of the high holy days in the Jewish year.

WeWork confirmed on Friday it would list on the Nasdaq stock market, which beat intense competition from its downtown rival, the New York Stock Exchange. The company waited an unusually long time in deciding who would win its listing, as it pitted the two exchanges against each other in a bid to win a sweetened package of advertising and other benefits that accompany an IPO.

WeWork plans to raise between $3 billion and $4 billion through its flotation, joining a number of high-profile private companies to tap public markets this year. The turbulent debuts of lossmaking ride-hailing apps Uber and Lyft, as well as the sharp decline in shares of start-up SmileDirectClub this week, have heaped pressure on private groups weighing an IPO.

If WeWork wins investor backing and can raise at least $3 billion in its IPO, it will also gain access to a $6 billion debt package from a group of banks that would lift its overall capital injection to as much as $10 billion.

That financing package has been seen by investors as crucial in giving WeWork the financial flexibility it needs to survive a potential economic downturn. Some of the company’s largest backers, including SoftBank, have shown their limits over how much more money they are willing to pump into the property group.

SoftBank executives have remained in close contact with Mr Neumann as he pushed forward with the IPO. The Japanese telecoms-to-technology group has pressured WeWork to shelve the listing after it faced a cool reception from investors. – Copyright The Financial Times Limited 2019

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