WeWork set to sack 2,000 staff as anger towards founder Adam Neumann grows
WeWork is expected to sack at least 2,000 people as soon as this week, as angry staff at the troubled office rental company turn on its co-founder Adam Neumann.
WeWork rents buildings long-term, gives them a millennial makeover with beer taps, communal spaces and tiny workspaces, and then rents them out short-term. Until recently it was America’s most highly valued private company with 527,000 tenants, or “members”, as WeWork calls them, worldwide.
Two thousand jobs is about 13% of WeWork’s 15,000 staff and few inside the company believe the cuts will stop there. WeWork declined to comment.
The cuts come after WeWork was forced to pull its share sale and new management moves to staunch the company’s huge losses.
Internally, staff say little or no work is getting done as workers prepare for the layoffs and new projects are put on hold. But the timing of the sackings is uncertain, not least because WeWork is now in active discussions to raise money before it runs out of cash next year.
After years of breakneck growth, new openings have all but stopped in WeWork’s two largest markets, New York and London, as landlords worry about the company’s future.
The company’s $850m deal to buy the landmark Lord & Taylor department store on Fifth Avenue in Manhattan is in trouble. And two large landlords in London, where WeWork has leased about 3.7m sq ft since 2014, recently told the Financial Times they would not sign new leases for the foreseeable future.
One worker, who spoke anonymously for fear of reprisals, said: “The atmosphere is toxic. A lot of people worked so hard for this company. We thought we were in on something really big.”
In online chats on WeWork’s Slack channel, obtained by the Guardian, staff shared memes about Adam Neumann, WeWork’s co-founder and the man many blame for the company’s dramatic fall from grace.
Some WeWork executives were in line for million-dollar payouts if the sale had gone ahead and are now likely to get nothing and could even lose their jobs.
One worker said: “I left crypto to join an even more ludicrous ‘parody, IRL [in real life]’ enterprise. Didn’t even think that was possible.”
Neumann, 40, cashed in around $700m of his own shares in WeWork before a share sale that at one point valued WeWork at $47bn. The company has begun attracting larger tenants, including IBM and Microsoft. The Guardian uses a WeWork space in California.
But the company’s losses have grown as quickly as its business. After investors began querying WeWork’s business model and Neumann’s stewardship of the company, that figure was slashed by more than half and WeWork decided to pull its initial public offering (IPO).
Staff said they had concerns about the influence that Neumann’s wife, Rebekah Paltrow Neumann, had at the company. The cousin of Gwyneth Paltrow, Neumann’s “strategic thought partner” had been in charge of succession planning should anything happen to her husband, and was the company’s chief brand and impact officer.
WeWork insiders said she had an outsized influence on hiring and new business ideas. The company’s decision to launch WeGrow, a “conscious entrepreneurial” private primary school run inside WeWork’s headquarters, was spearheaded by Paltrow Neumann. Multiple employees lost their jobs at WeWork after Paltrow Neumann met them and she didn’t like their energy, according to the Wall Street Journal.
The school will now close and Paltrow Neumann has been barred from serving on the company’s board.
The company was expected to raise as much as $4bn from the share sale and had lined up a $6bn bank loan, contingent on the IPO. The decision to pull the sale has left WeWork scrambling for cash.
According to the Wall Street Journal, Softbank, the Japanese investment firm that is WeWork’s largest investor, and JP Morgan Chase are now considering bailing out the office rentals company. The investment would further dilute Neumann’s control of the company.
The company is currently burning through $700m a quarter. Last year it lost $1.6bn and it had $2.5bn in cash as of 30 June. At the current rate, We, as WeWork’s parent company is called, would run out of money after the first quarter of 2020, according analysts Sanford C Bernstein & Co.
Newly installed co-CEOs Sebastian Gunningham and Artie Minson have already begun the cost-cutting process, halting new leases and putting a $60m G650ER jet bought under Neumann’s reign up for sale.
Neumann landed on Forbes’ list of the world’s richest people earlier this year with a net worth of $4.1bn. Forbes has now lowered its estimate of his wealth to at most $600m.
On Monday, Business Insider reported that WeWork tenants had received an email informing them of “potentially elevated levels of formaldehyde” in phone booths throughout WeWork offices in the US and Canada. The company is pulling 1,600 phone booths that “may be impacted” and an additional 700 phone booths have yet to be tested for formaldehyde.