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WeWork's Neumann steps down as SoftBank seeks to save investment

Controversial co-founder to stay on as non-executive chairman

NEW YORK -- Adam Neumann, co-founder of the SoftBank Group-backed startup WeWork, has relinquished his role as CEO, the co-working company said Tuesday.

The "scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive," Neumann, who will stay on as non-executive chairman, said in a statement.

The leadership change at WeWork comes after parent We Company delayed its initial public offering.

This perceived blunder, together with a continuing slide on the public market by Uber Technologies, has put under scrutiny Masayoshi Son's acumen as the top tech investor of this generation as the SoftBank chief prepares to launch a second Vision Fund.

Earlier this month, We Company slashed its valuation by more than half to $20 billion amid tepid investor interest, before moving to postpone the IPO -- reportedly at the urging of SoftBank, its largest outside shareholder.

The co-working space operator was previously valued at $47 billion, when SoftBank injected $2 billion of fresh capital in January. According to the We Company's prospectus, it recorded a net loss of nearly $2 billion last year.

Neumann's idiosyncrasies and outsize control over the company had been key concerns for investors. The Israeli-born entrepreneur also made headlines in August when it was revealed that We Company paid him $5.9 million in equity for using the name "We," which Neumann had trademarked for his own holding company. The payment was subsequently returned.

Neumann's wife, Rebekah, who co-founded the company and serves as chief brand and impact officer, shares her husband's reputation of commanding an "impulsive" management style, having ordered people to be fired because she did not "like their energy," The Wall Street Journal reported.

According to We Company's public filings, Adam Neumann holds over 50% of Class B and Class C shares of the company, which are entitled to 10 votes per share compared to just one vote per Class A share.

The We Company had reduced the power of those high-vote shares from 20 votes per share in a move to appease investor concerns.

Two WeWork executives, Artie Minson and Sebastian Gunningham, have been named co-CEOs.

Neumann's resignation does not mean WeWork's troubles are over, some have warned.

"CEO turnover is rarely a smooth event for firms, particularly those trying to transition from private to public," said Michael Ewens, associate professor of finance and entrepreneurship at California Institute of Technology. "The previous CEO clearly had a lot of decision-making power, so replacing him will likely coincide with a host of other corporate governance changes."

Assuming the co-CEO arrangement as interim, the leadership turnover is incomplete, Ewens added.

"Finding high-quality outside talent who can be convinced to right this ship may be difficult, particularly after a large write-down in firm valuation," he said.

In a statement last week, WeWork said it expects the stock listing to be completed by end of this year.

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