As the WeWork saga continues, there are hundreds of commentators offering analysis in the wake of the massive IPO debacle.  Since my last blog post, there are new developments that have pushed this story clearly to the front of the most absurd business stories of 2019.

The wheels have come off since the failed IPO in September.

Since WeWork was not able to raise funds given the failed IPO, they were rapidly running out of cash.  Rumors circulated suggesting they need to fire employees on a massive scale to conserve depleting cash but they didn’t have enough cash to pay their severance!  

What a Catch 22!

Meanwhile, the main investor of WeWork, Japan’s Softbank (specifically chairman Masayoshi Son), removed the visionary, co-founder and frontman of WeWork, Adam Neuman, from his role in the company.  

Remember Adam’s voting rights?  He originally received 20 votes for each share he owned versus one vote for the other shareholders.  He could exert significant influence on the direction of the company by his voting whether or not he was the CEO or a board member.

At this point, everything was in the exact wrong position.  Thousands of employees were facing job cuts and the company was hemorrhaging cash due to its unsustainable losses.

The primary investor, Softbank, had already sunk a cool $10+ billion into the visionary co-founder, er, company and stood to lose all of it in a catastrophic collapse.

And Adam Neumann was being forced out while he still maintained great voting power.

The conditions were perfect for the negotiation of epic proportions.  And Neumann delivered.

Too Big To Fail

To rid Neumann of his shares (and his voting power), Softbank (Son) paid Neumann $1.7 billion to take control of the struggling, sputtering, almost bankrupt company.

You may need to read that again.  

The co-founder restored his billionaire status with a bailout the world has not seen since 2008.

The gallery erupted. 

Employees facing job losses and worthless options merely weeks after expecting epic payouts vented their anger at Neumann privately and publicly.

The political class took notice as the presidential hopefuls happily joined in disdain at the evils of capitalism that allowed this to prevail.

Commentators are now claiming Adam Neumann, a co-founder of the company is ‘The Most Hated Man in America.’ 

One of the more provocative opinions compares the co-founder of WeWork, Adam Neumann, to the former CEO of Turing Pharmaceuticals, Martin Shkreli.

While Adam Neumann may be hated in America right now, he doesn’t deserve to be.

The facts of why people may hate him are completely different than why people hated Martin Shkreli.  There’s plenty of anger about the trainwreck of WeWork but Adam Neumann doesn’t deserve all the blame. 

In an ongoing attempt to draw lessons learned from 2019’s juiciest business gossip story, here are six reasons Adam Neumann doesn’t deserve to be the most hated man in America.

1. WeWork only received investments from qualified investors

“Qualified investors” is the code phrase to indicate rich people.  There were no widows or orphans riding the WeWork gravy train on its ascent to trillionaire mountain.  All the people who took a haircut owning this company have the financial resources and (presumably) aptitude to be able to invest in these high-risk ventures.

Unlike a public company, private markets are only available to people the Securities and Exchange Commission (SEC) bestows upon the ability to invest.  Unlike Enron, WorldCom, AIG or GM, no average investor had funds in this blowup.  

2. The financial statements included unique language and metrics that should have been a warning to anyone willing to invest

Hindsight is 20/20 in this case again.  I get it, accounting is boring. People would rather listen to the story and dream about glorious exits and mountains of capital gains than pore through arcane language attempting to discern the meaning of a created vocabulary.  If there are terms you don’t know (Community-adjusted EBITDA), spend the time to learn the basic vocabulary of the company before placing good money in the next round.

Photo by Charles Etoroma

3. Anger is a stage of grief

If you are an impacted employee of WeWork and your future earnings have been ruined by the actions of a few, my condolences are with you. 

You may have worked at a below-market salary with the expectation of the IPO and a big payout.  Your hours spent at work most likely did not equate to the value you received as a salaried employee.  To top it off, you may now be laid off.

You have a right to be angry, depressed and express frustration at the situation.  While it feels easier to target anger at one person, it may just not reflect the shared blame for the fiasco.

4. Capitalism still works, but this was more of a redistribution of wealth than actually creating value

For all the political leaders favoring some form of increase of redistribution of wealth, this fits that narrative.

This is a historic redistribution of wealth!  

A founder with an arguably worthless company talks a billionaire into paying him $1.7 billion for his voting rights.  If left unmanaged, all the shares for all the billionaires would have been worth zero.  


Yet Neumann convinced Softbank/Son to pay an egregious amount for those shares.  He convinced a group of billionaires to share their wealth with him and help address the “wealth inequality”.  All without government involvement!

Congrats, Adam.  This may be the greatest salesmanship of the decade!

5. People aren’t rational

Traditional economics teaches that people are rational.  Most people (and behavioral economics) know that isn’t the case and this story proves it.

Faced with the prospect of reporting back to investors that the $10+ billion he had invested in WeWork was now worthless, Masayoshi Son doubles down on his investment and throws good money after bad to make this deal for Adam.

That whole adage, “The first loss is the least loss,” is so hard to abide by.  Taking a loss is so hard on the pride that people will go to great, irrational lengths to avoid it.

6. You get what you negotiate

Possibly the greatest lesson of all of this is when you find an opportunity of historic proportions, it calls for the negotiations of historic proportions.  I credit Neumann and his team to identify the “bleeding neck” and going for the jugular in the negotiations. Congrats on a successful deal. I can’t believe they paid you half that amount.

The frustration at this story is palpable.  A billion-dollar bailout to a guy who created a cult following renting out offices is absolutely, 100% astounding.  Most of us cannot fathom a percent of this wealth in our lifetimes.

Yet this is not Neumann’s doing.  The loss producing, revenue-growth-at-any-cost company Neumann co-founded was propelled by an ever-growing venture capital fanclub…until it wasn’t.  I place most of the blame on those providing easy money. It was too much to handle as evidenced by its mismanagement. 

As the owner of the “gold”, Adam played by the VC’s rules.  He just convinced them how to spend it.  Don’t hate Neumann for their poor judgment.

Where do you place the blame for Adam receiving $1.7 billion while WeWork employees are laid off?