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CEO ouster, looming layoffs and devaluation turn WeWork into cautionary tale – TechCrunch

Major layoffs are all but inevitable at high-flying real estate startup WeWork after Adam Neumann succumbed to pressure today to step down as CEO and take over the role of non-executive chairman of the company he cofounded nine years ago.

Two well-placed sources tell us that the scope is likely to be massive, and include some of its newest business divisions, which these same sources anticipate will be enough to get the company focused on its core business. One of these sources speculates that over time, up to half of WeWork's 15,000 employees – 9,000 of whom have been employed over the past two years – could be put off to shore up the company's unprofitable expenses. The sentiment echoes a new piece in The Information that reports a "group of executives from WeWork's parent company and bankers" have discussed laying off as many as 5,000 employees — a third of its workforce.

Neumanns have as much to say in the matter, either way. As part of his departure from the role, he has agreed to further reduce the power of his supervisory stake from an original 20 votes for every one vote that a regular WeWork investor would receive to just three, reports Bloomberg. His wife, Rebekah, a cofounder who is thought by insiders to have played a heavy role in the company's original – and highly atypical – IPO prospectus, is also leaving the business.

Rather breathtaking, the speed with which the couple was just elbowed aside. Still, some others involved in the company look to get a far worse deal. The Japanese conglomerate SoftBank currently stands to lose billions of dollars on its investment in the company – if it winds up writing down nearly the entire investment. Even an aggressive ratchet clause will do much to protect SoftBank if WeWork's shares eventually sink into the public market.

It would seem an extreme correction to a culture that had become, well, anything but restrained. It is also far from clear that it would have the intended effect of attracting public shareholders to the company whose wheels began coming off when SoftBank first plugged $ 4.4 billion into WeWork roughly two years ago, according to our sources. (Roughly $ 6 billion more would follow.) As one of these individuals, who has known Neumann for many years, says, “Adam already had a healthy ego. What the f_ck do you think is going to happen when given billions of dollars? ”

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