Speaker 1: A couple of years ago, Andy's Alevski needed an office.
Speaker 1: He works in urban planning and he lived in Boston
Speaker 1: at the time, so he rented a space from we Work,
Speaker 1: and he was really impressed by their perks. One of
Speaker 1: the most exciting things was Monday mornings because they had
Speaker 1: free breakfast, and I remember one of my first weeks.
Speaker 1: It was like egg and cheese breakfast sandwiches on a
Speaker 1: dancy bagel, and it was so good. He wasn't so
Speaker 1: much into the free beer, but the Monday breakfasts those
Speaker 1: were his favorite. And Andy says the food was really
Speaker 1: fancy for years, but then things took a turn. Um.
Speaker 1: It was more of like a sudden drop off, I
Speaker 1: would say, um. And then by the time I left
Speaker 1: we Work, there definitely were some cost cuts and we
Speaker 1: were down to um wonderbread with peanut butter and jelly,
Speaker 1: which was definitely a disappointment compared to what we had
Speaker 1: at first. So probably the worst was they decided to
Speaker 1: be avocado toast day, so they had a bag of
Speaker 1: wonderbread and some mushed up avocados. But by the time
Speaker 1: everyone showed up for if the avocado has got gray,
Speaker 1: so it's just this like gray avocado bush, and this
Speaker 1: sudden decline in Andy's Monday breakfast was happening at a
Speaker 1: dramatic time for We Work. It was around the time
Speaker 1: the company was trying to go public in September. Andy
Speaker 1: started wondering what was going on at we Work. I
Speaker 1: wasn't really that aware before the I p O happened,
Speaker 1: but you know, the negative news started piling on um
Speaker 1: and it kind of became all we talked about at
Speaker 1: the office because it was unfortunately sort of entertating. I mean,
Speaker 1: I didn't talk about it with the staff at we Work,
Speaker 1: but amongst ourselves, like we would constantly share articles and
Speaker 1: videos that became kind of obsessed by it. And he
Speaker 1: wasn't the only person who was obsessed with following the
Speaker 1: news about We Work. In the span of about a month,
Speaker 1: We Work went from a triumphant startup to a once
Speaker 1: in a generation catastrophe. It was a train wreck that
Speaker 1: people like Andy just couldn't look away from. You're listening
Speaker 1: to Foundering In this episode, we're talking about the undoing
Speaker 1: of we Works. Big moment. It's I p O. Behind
Speaker 1: the scenes of We Works I p O saga. There
Speaker 1: was a power struggle between two men. First we have
Speaker 1: Adam Newman, we Works, brash, ambitious and extravagant CEO, and
Speaker 1: the second man is we works biggest backer, Massa Yoshi,
Speaker 1: CEO of soft Bank and an eccentric billionaire investor. Massa
Speaker 1: was betting big on Adam, and as we Work approached
Speaker 1: as ip O. He was about to find out if
Speaker 1: that had been the right call. By the way, we
Speaker 1: reached out to spokespeople for Adam Newman, we Work and
Speaker 1: soft Bank, they declined to give us a statement. In
Speaker 1: late we Work was in a cash crunch. That year.
Speaker 1: The company lost two billion dollars. They spent about two
Speaker 1: dollars for every all are they made in sales, So
Speaker 1: to get more cash, they were considering an I p O.
Speaker 1: But here's the thing. My sources tell me that we
Speaker 1: Work didn't necessarily want to go public because when you
Speaker 1: go public there's some clear downsides. You have to publish
Speaker 1: tons of financial information and do quarterly earnings reports. You
Speaker 1: have a lot of new shareholders to answer to. It
Speaker 1: could be a huge pain. So going public was plan B.
Speaker 1: Plan A was getting more money from soft Bank. Adam
Speaker 1: was pretty confident that he could get Massa to agree
Speaker 1: to a huge deal. Soft Bank would invest sixteen billion
Speaker 1: dollars more in We Work and would own more than
Speaker 1: half of the company, and that money would be enough
Speaker 1: cash to keep we were going for a long time,
Speaker 1: and Massa was interested in doing this deal too because
Speaker 1: he believed in Adam. Here's my colleague, Sarah McBride, who
Speaker 1: has spent years covering soft Bank and Massa. Massa is
Speaker 1: actually a very loyal, trusting guy. So there are certain
Speaker 1: people that Massa it just takes two and he thinks
Speaker 1: the world of like Jack ma for example, and for
Speaker 1: a while like Adam Human And if you fall into
Speaker 1: that category, he just assumes you're a stand up person
Speaker 1: who's just going to do the right thing, run your
Speaker 1: business really well, and he'll ignore all evidence to the contrary.
Speaker 1: So I think Adam kind of fell into this bucket.
Speaker 1: He basically could do no wrong, and Massa just trusted him.
Speaker 1: But already there were some bad signs, some hints that
Speaker 1: all might not be well in We Work land. Sarah
Speaker 1: told me there was a lot of tension within soft
Speaker 1: Bank about the amount of money they were pouring into
Speaker 1: We Work, So internally, people at soft Bank didn't like
Speaker 1: the Wee Work investment, it was just too much, and
Speaker 1: nobody internally or very few people internally, whanted we Work
Speaker 1: to get more money, but Massa kept finding ways to
Speaker 1: do it. So Massa had indicated to Adam that he'd
Speaker 1: be able to make another big soft Bank investment and
Speaker 1: we Work, and Adam was kind of counting on that cash.
Speaker 1: But on Christmas Eve, Massa gave Adam a call. He
Speaker 1: had bad news. Soft Bank stock had taken a tumble,
Speaker 1: plus his biggest investors had gotten cold feet about investing
Speaker 1: so much more in We Work, so Massa was stuck.
Speaker 1: He told Adam he couldn't invest the sixteen billion dollars
Speaker 1: as planned. Instead, he was able to come up with
Speaker 1: only two billion dollars. Now regarding we Works owned fresh
Speaker 1: to billion dollars in funding from soft Bank announced this week.
Speaker 1: At one point that was supposed to be as much
Speaker 1: as sixteen billion dollars. So the Japanese conglomerate announced Monday
Speaker 1: it's investing and additional two billion dollars in the coworking startup,
Speaker 1: a step back from the sixteen million dollar investment that
Speaker 1: would have given soft Bank a controlling steak over late
Speaker 1: last year. They had floated this plan like what we're
Speaker 1: going to take over? We work, We want to be
Speaker 1: wholly invested in this business. We want an ownership steak.
Speaker 1: And then the stock market went haywire. SoftBank shares in
Speaker 1: particular have taken a dive. Massa's decision to back pedal
Speaker 1: on the investment was a pretty rough setback for Adam.
Speaker 1: I actually got to speak to Adam about this pivotal
Speaker 1: moment after Massa had disappointed him, but before the I
Speaker 1: p O. I asked him how he'd felt when he
Speaker 1: got that call from Massa. He responded in kind of
Speaker 1: an indirect way. He told me his superpower is change,
Speaker 1: which is a very atom thing to say. He and
Speaker 1: his wife, Rebecca Newman, really loved the idea of superpowers.
Speaker 1: Remember the mission of their elementary school, We Grow, was
Speaker 1: to unleash every human superpowers. Anyway, he said his superpower
Speaker 1: helped him navigate through his disappointment with Massa. My superpower
Speaker 1: is change, and change is painful. Change is uncomfortable. You've
Speaker 1: got to be open to feedback. You gotta admit things
Speaker 1: that are working. Yes, say yes. Massa and I spoke
Speaker 1: and we're not going to do the big deal that
Speaker 1: we were going to do and be comfort sent. Well,
Speaker 1: what can I learn from that? Good or bad? But
Speaker 1: I don't know that. We'll look backwards and half for
Speaker 1: your adviser. I'm not sure if you caught that, but
Speaker 1: he said that he and Massa were not going to
Speaker 1: be able to do the deal they'd agreed to, and
Speaker 1: now Adam had to adapt and change to move forward.
Speaker 1: To him, it was a skill he'd spent a lifetime developing,
Speaker 1: and as I grew up all of my life, I've
Speaker 1: had to change a lot, a lot of challenges when
Speaker 1: I was a kid, and being dyslexic forced me to
Speaker 1: always change how I tried to solve a problem and
Speaker 1: try to do things, but mainly embrace it. Change is
Speaker 1: always slightly painful, but how you change, how you embrace it,
Speaker 1: how you enjoyed the journey, and being willing to do
Speaker 1: it again and again. It is what defines an organization
Speaker 1: and leader or an individual. What strikes me about this
Speaker 1: moment is that this is a pretty vulnerable topic for Adam.
Speaker 1: He's clearly sad that the soft Bank deal didn't happen,
Speaker 1: but in classic Atom fashion, he didn't want to focus
Speaker 1: on his disappointment for too long. He wanted to make
Speaker 1: sure that I understood that his relationship with Massa was
Speaker 1: still very strong. You can even hear in the tape
Speaker 1: that he pounded the table for emphasis. Let's my biggest
Speaker 1: investor giving ten a half billion. Yeah, very nice week,
Speaker 1: but so but I mean the thing, I think that's
Speaker 1: overstated a little bit. That's a huge investment, one of
Speaker 1: the largest ones in history. Yeah, so very very very
Speaker 1: very positive. We were contemplating a larger deal and the
Speaker 1: world crashed for a second and must have felt that
Speaker 1: things changed. But we're very very happy with where we
Speaker 1: came to. Both sides feel perfect. Softing is very comfortable
Speaker 1: with their total holdings. Were very comfortable with their total holding.
Speaker 1: So very good. And my relationship with us has never
Speaker 1: been stronger because we had opened communication and talk this
Speaker 1: problem and I told him what I wanted. The basis great,
Speaker 1: it's good for you, and then we executed them. And
Speaker 1: I think you can measure relationships in time of church.
Speaker 1: So Adam didn't get the money from MASSA that he
Speaker 1: was counting on, but he did get something else out
Speaker 1: of the deal, a new valuation for we work as
Speaker 1: part of the Investment, soft Bank and we Work agreed
Speaker 1: that the company was now worth forty seven billion dollars.
Speaker 1: It's a wildly high number that comes up again and again,
Speaker 1: forty seven billion dollars, forty seven billion dollars, forty seven
Speaker 1: billion dollars, forty seven billion dollars, forty seven billion dollars.
Speaker 1: So Adams company now had this flashy new valuation, but
Speaker 1: they still needed cash. Because MASSA didn't come through, Adam
Speaker 1: turned to Plan B. He decided to go all in
Speaker 1: on an i p O, whether his company was ready
Speaker 1: or not. For a few months, we were kept its
Speaker 1: planned secret, and then in April, office rental giant we
Speaker 1: Work is aiming to go public. That initial public offering
Speaker 1: could take place in September, earlier than many investors had anticipated.
Speaker 1: Now they're tech Unicorn has filed to go public. This
Speaker 1: time it is we Work, now known as the we Company.
Speaker 1: It has announced that it has confidentially submitted its paperwork
Speaker 1: to the SEC. Four. An i p O follows several
Speaker 1: other big money losing companies like Uber and Live but
Speaker 1: I've also gone public this year as well. The filings
Speaker 1: reveal some lofty goals. It says its mission is to
Speaker 1: elevate the world's consciousness. To reporters, that announcement is like
Speaker 1: the gun firing at the start of a race. High
Speaker 1: profile I p O s like we Works are huge news.
Speaker 1: And once it was clear we Work was definitely planning
Speaker 1: to go public, big banks like Morgan, Stanley, Goldman, Sachs
Speaker 1: and JP Morgan were lining up to try to get
Speaker 1: Adam to pick their bank to lead the deal. To
Speaker 1: help me explain we worked wild ride to an I
Speaker 1: p O. I want to introduce my colleague Jillian Tan
Speaker 1: who covers Wall Street. Yeah, everyone was very up to mistake.
Speaker 1: A lot of the bankers, you know, it was on
Speaker 1: their radar. It was something that was sort of going
Speaker 1: to happen in later So folks were pretty excited. They
Speaker 1: knew Adam Newman. He was obviously known to be one
Speaker 1: of those founders that had a big personality. So folks
Speaker 1: were very much already talking about we Work. But it
Speaker 1: was all very much in a positive life. And what
Speaker 1: do banks get out of doing an I p O
Speaker 1: for a company? A lot of money? So banks charged
Speaker 1: these companies or feats, not that they just wanted to
Speaker 1: do it out of the kindness. Through their hearts, they're
Speaker 1: earning millions of dollars. Hundreds of millions of dollars. Each
Speaker 1: bank wanted Adam to pick them for this deal. So
Speaker 1: when they pitched themselves to we Work, they told Adam
Speaker 1: numbers that he would be excited to hear. They said
Speaker 1: that we Work could go public at huge valuations as
Speaker 1: just a hundred billion dollars. Those estimates played a big
Speaker 1: role in over hyping the We Work. I po to
Speaker 1: explain this a little more, we talked to Matt Levine,
Speaker 1: a Bloomberg opinion columnist who used to be one of
Speaker 1: those bankers who advised companies ongoing public. Yeah, I was.
Speaker 1: It was an equity capital markets banker, and I would
Speaker 1: pitch companies on deals, and we would want to pitch
Speaker 1: them on deals that they would want to do. And
Speaker 1: Matt says that because banks are competing to be the
Speaker 1: lead bank to take We Work public, they're incentivized to
Speaker 1: throw out bigger and bigger numbers even if they're totally unrealistic.
Speaker 1: You know, the banker is not on the hook for
Speaker 1: the amount for the number, they say, like, you can
Speaker 1: kind of make up any number you want and justify it.
Speaker 1: So if you go to a company and say we
Speaker 1: think you could do an IPO at a dollar evaluation.
Speaker 1: Then they'll be excited because they want to raise a
Speaker 1: lot of money at a high price, and they'll hire you.
Speaker 1: And then things can go wrong and you'll say, oh,
Speaker 1: things went wrong, that's why we couldn't get you the
Speaker 1: number we originally promised. So you have a lot of incentives.
Speaker 1: Just give people the numbers they want to hear. So
Speaker 1: that summer, we Work was prepping for its I p
Speaker 1: O and they were really depending on it going well.
Speaker 1: The company was counting on getting nine billion dollars from
Speaker 1: going public by selling stock and borrowing money from banks.
Speaker 1: And then they released a document called the S one.
Speaker 1: It's basically a requirement for going public. Reporters love the
Speaker 1: S one. It's like Christmas. We wake up early and
Speaker 1: wait for it to be released because the S one
Speaker 1: is full of new information, profits, losses, expenses, lists of
Speaker 1: all the ways things could go wrong. These are things
Speaker 1: companies don't usually like sharing with reporters, but we Works
Speaker 1: S one was not normal. It dropped like a bombshell.
Speaker 1: It detailed so many problems within the company, huge losses,
Speaker 1: conflicts of interest, weird nepotism. We're going to go through
Speaker 1: one by one the problems and WE Works S one.
Speaker 1: I'll start with what will probably be remembered as the
Speaker 1: most gregious and ridiculous item on the list. Adam owned
Speaker 1: the trademark to the word we Well. Technically the trademark
Speaker 1: was owned by his holding company, and then when WE
Speaker 1: Work wanted to change its name from WE Worked to
Speaker 1: the Wei company, Adam sold that trademark to his own
Speaker 1: company for five point nine million dollars in stock. This
Speaker 1: blew my mind. Yeah, that was the probably most outrageous
Speaker 1: item in the whole S one that the CEO had
Speaker 1: taken money out of the company and put it in
Speaker 1: his own pocket. And the reason that's outrageous is because
Speaker 1: WE Work had rebranded itself to we and he had
Speaker 1: profited from that rebranding, as opposed to any other normal
Speaker 1: CEO who would just make the rebranding happen, as opposed
Speaker 1: to secretly owning the trademark when that rebranding happened. Another
Speaker 1: thing that came up in the asmen was Adam's succession plan,
Speaker 1: which is that if Adam dies, his wife Rebecca gets
Speaker 1: to help pick his successor, which is very strange, hugely strange.
Speaker 1: That's something you might expect for like a blueberry farm operation, right, like,
Speaker 1: not a giant company backed by a huge conglomerate like
Speaker 1: soft Bank, that the successor is picked by the CEO's
Speaker 1: wife and two directors who he's close to. Like, it
Speaker 1: couldn't be more brigged if you'd like. Yeah, usually this
Speaker 1: is a decision that the board of directors makes independently,
Speaker 1: that's the standard. This was very surprising. It does not
Speaker 1: usually involve your wife, even if she is an executive
Speaker 1: at the company. Absolutely, So that's already a sign of
Speaker 1: undue influence. And just to keep adding to the list,
Speaker 1: Adam personally owned stakes in buildings where we work. Was
Speaker 1: a tenant, which means that we work his company is
Speaker 1: paying him Adam Newman rent, which is a total conflict
Speaker 1: of interest. It means kind of you're on both sides
Speaker 1: of this transaction and it's just one of these things
Speaker 1: that people don't do. And it was a huge red flag. Yes,
Speaker 1: so he was literally buying up these properties and then
Speaker 1: immediately leasing them to we work. So another thing that
Speaker 1: the s one revealed was that Adam had twenty to
Speaker 1: one super voting shares, which me he owned shares in
Speaker 1: the company that had twenty votes while all the other
Speaker 1: shares had one, which means essentially, even if he owns
Speaker 1: a small portion of the company, he has voting control
Speaker 1: of every major decision that companies ever going to make.
Speaker 1: Investors found the fact that the board had signed off
Speaker 1: on all of these things, including the twenty to one
Speaker 1: super voting shares, is super worrisome just because it showed
Speaker 1: a lack of governance at the top. Yeah, it means
Speaker 1: no one is saying no to Adam. I was wondering, like,
Speaker 1: all these things point to the same pattern, right, which
Speaker 1: is that like Adam looks at his company as a
Speaker 1: way for him to like grow his prestigion also his
Speaker 1: personal wealth. It was sort of strange. I feel like
Speaker 1: I didn't quite understand why it was all set up
Speaker 1: this way. Yeah. One thing I think was the word
Speaker 1: Adam was among the most used words in the whole document.
Speaker 1: So to excuse the pun, but it's not it's not
Speaker 1: a way. It's all about an eye, right, This is
Speaker 1: about one man. This is his show. Yeah. Yeah, And
Speaker 1: unlike other s ones, for example, they also refer to
Speaker 1: Adam by his first name I think the generous interpretation
Speaker 1: is that his wife was also an executive at the company,
Speaker 1: is the same last name. But it certainly struck people
Speaker 1: that it was this whole document, and so much of
Speaker 1: it seemed to me about this one person, Adam, who
Speaker 1: was doing a lot of things outside the company or
Speaker 1: relating to the company that were not necessarily in his
Speaker 1: company's best interests, which if you're an investor, you are
Speaker 1: not excited to hear because you're hoping that the CEO
Speaker 1: does things to the company's best interests and not to
Speaker 1: his own. Absolutely, so the number of things that were
Speaker 1: not Kosha from an investors point of view, would just,
Speaker 1: you know, bountiful. When the S one came out, it
Speaker 1: was supposed to be we works, big debut, but instead
Speaker 1: it landed like a pile of bricks. Analysts and potential
Speaker 1: investors were combing through the rubble and they were not thrilled.
Speaker 1: Pundits started writing blog posts about all the warning signs
Speaker 1: that they saw detailed in the S one, and maybe
Speaker 1: what scared investors the most was that it was such
Speaker 1: a bad look. It made Adam look greedy, like he
Speaker 1: wanted to score points for himself against his own company.
Speaker 1: Here's Matt Levine again. I like to joke and I
Speaker 1: think this is kind of true that the actual thing
Speaker 1: that broke that we were at IPO is the story
Speaker 1: about Adam Newman selling the trademark for the word we
Speaker 1: to the company for six million dollars, which is such
Speaker 1: an absurd story of like of like poor governance and
Speaker 1: conflict of interest and like not looking at for the
Speaker 1: shareholders and like short termism and not thinking about the
Speaker 1: good of the company and not thinking about optics. It's
Speaker 1: just like you tell anyone that story and they get offended,
Speaker 1: and it's such an easy like point to rally around.
Speaker 1: After the S one came out, a lot of people
Speaker 1: were wondering what was Adam thinking? For what it's worth.
Speaker 1: A person close to Adam told me that when Adam
Speaker 1: sold the trademark to WE Work, he was following advice
Speaker 1: from his lawyers, and a few months earlier I got
Speaker 1: to ask Adam about a different conflict of interest him
Speaker 1: acting as landlord to WE Work. I asked if he
Speaker 1: thought that decision was inappropriate, and he gave me a
Speaker 1: surprising answer. He was a little defensive. Did you think
Speaker 1: in the end that it was inappropriate to have those
Speaker 1: whom things for you personally. Do you think it's inappropriate?
Speaker 1: I think its founders is our job to lead into
Speaker 1: growth and innovate, and I think we need to struct
Speaker 1: an industry. If you don't have to care, if I
Speaker 1: don't put my own money on it, I would other
Speaker 1: real estate owners ever have the courage to find final
Speaker 1: things of an investment. Why would anyone else? Think? Yeah?
Speaker 1: But it doesn't make it a little different if you're
Speaker 1: sitting on both sides of the table. If I'm losing
Speaker 1: money on the side of the real estate, which is fashion,
Speaker 1: not if what I did was purely for the sake
Speaker 1: of pushing the business app. Okay, so you hear Adam
Speaker 1: saying here that he lost money. That's actually open to debate.
Speaker 1: But let me explain some of his reasoning. Adam agreed
Speaker 1: publicly to sell his stakes in the buildings back to
Speaker 1: we Work at cost, So assuming those buildings rose in value,
Speaker 1: Adam was losing out on the profits he could have
Speaker 1: made by selling them. At the same time, Adam was
Speaker 1: still collecting rent. I spoke to two people close to
Speaker 1: him who told me that Adam was charging below market rates,
Speaker 1: but one of them said, Adam also made a profit
Speaker 1: on at least one of the buildings he owned. Regardless,
Speaker 1: Adam acting as a landlord to his own company is
Speaker 1: a pretty glaring conflict of interest. While I was sitting
Speaker 1: down with Adam, there was one point he really wanted
Speaker 1: me to understand. He felt that his actions were justified
Speaker 1: because he did it to help we work grow. He
Speaker 1: was a founder, trying to lead. He said that he
Speaker 1: had to buy those buildings in order to show other
Speaker 1: landlords it was a good investment work once to develop
Speaker 1: cities in the future, but wasn't able to buy anything. Yeah,
Speaker 1: if funds weren't buy landlords, we were talkings and come
Speaker 1: to this with us. No one was doing it. Yeah, okay,
Speaker 1: if no one's going to do it, we'll do it first. Sure, sure, sure, sure, yeah,
Speaker 1: So that's that's why we did it. Then, I'm very
Speaker 1: excited that they did it because if I, if I
Speaker 1: wasn't able to do it, I don't think we wouldn't
Speaker 1: be today at this stage. I'm excited I did it.
Speaker 1: If I wasn't able to do it, we wouldn't be
Speaker 1: at this stage. It's amazing that Adam said this, even
Speaker 1: after he had been criticized for this conflict of interest,
Speaker 1: and after the S one came out and revealed even
Speaker 1: more conflicts, a lot of people were asking why did
Speaker 1: we Work think it was a good idea to publish
Speaker 1: the S one? Well, I heard one theory that we
Speaker 1: Work had always been running their business this way and
Speaker 1: it hadn't been a problem for them before. Here's Matt,
Speaker 1: Why were they comfortable with those conflicts of interest is
Speaker 1: an interesting question, right? I mean, part of it is
Speaker 1: like a lack of self awareness that sort of permeated
Speaker 1: everything and we Work. So this aligns with what a
Speaker 1: few different sources have told me over the years that
Speaker 1: Adam is not a detail oriented guy that he rarely
Speaker 1: used as a computer. And there's a second part to
Speaker 1: Matt's theory. I mean, part of it is that a
Speaker 1: lot of tech companies had gone public with pretty gruesome
Speaker 1: governance terms and pretty gruesome conflicts of interest, then the
Speaker 1: market had crumbled and bought them. Just to give you
Speaker 1: some more context, Snapchat, for example, had recently sold shares
Speaker 1: in its I p O that had zero votes. That
Speaker 1: was unprecedented and seen as a huge power grab by
Speaker 1: its founders. But Snapchat was such a hot company, so
Speaker 1: investors held their noses and bought it anyway. And I
Speaker 1: think if you're we work, you think we're not that
Speaker 1: much worse in these disclosures than a lot of other companies.
Speaker 1: And we're better because where we work in a building
Speaker 1: community in the where the world's first physical social network.
Speaker 1: So people who were willing to suck it up and
Speaker 1: buy snap Um even with bad governance terms, should be
Speaker 1: willing to suck it up and buy we work with
Speaker 1: like ridiculous conflicts of interest. All this backlash made its
Speaker 1: way over to Masa in Tokyo at soft Bank. Some
Speaker 1: of his lieutenants had been nervous about we Work doing
Speaker 1: an I p O. But for a long time they
Speaker 1: hadn't been able to convey Massa that we Work was
Speaker 1: headed down the wrong path. Masa had been sure that
Speaker 1: Adam deserved his trust. Here's my colleague Sarah again. But
Speaker 1: then when the I p O documents actually became public,
Speaker 1: and it wasn't just that it didn't go well, people
Speaker 1: were mocking it. It became a meme. It was just brutal.
Speaker 1: And so after that, I think Massa was forced to
Speaker 1: acknowledge a bunch of things He hadn't wanted to acknowledge
Speaker 1: before that that he just kind of ignored. Sarah says
Speaker 1: that Massa also took Adam's bad behavior personally. I think
Speaker 1: Massa felt betrayed by Adam. I think he'd put a
Speaker 1: lot of trust in Adam and just expected him to
Speaker 1: do a good job. And when it turned out Adam
Speaker 1: hadn't done a good job, it wasn't like, oh, Adam
Speaker 1: screwed up. It was a personal betrayal. I think that's
Speaker 1: just because Adam was in this special category of people
Speaker 1: that Massa just really believed in, and if you're in
Speaker 1: that category, you have to live up to it, and
Speaker 1: if you don't, that's it. So while everyone was freaking
Speaker 1: out over reworks S one, you might be wondering what
Speaker 1: was we work doing? They were trying to salvage their
Speaker 1: I p O. Behind the scenes, the company was scrambling
Speaker 1: to make some changes to try to reassure potential investors.
Speaker 1: They took Rebecca out of the succession plan. They decreased
Speaker 1: adams super voting shares from twenty to one to ten
Speaker 1: to one, and eventually all the way down to three
Speaker 1: to one. Adam had to return the five point nine
Speaker 1: million dollars in stock that he got by selling the
Speaker 1: WE trademark, but it was too late. The damage had
Speaker 1: been done. According to Sarah's source, Massa started to change
Speaker 1: his thinking after it was clear to him that the
Speaker 1: S one was being received so poorly that WE Work
Speaker 1: I p O still seemed like a joke. Something had
Speaker 1: to happen, and Massa and Adam met in Tokyo and
Speaker 1: Massa suggested to Adam that he pulled the I p
Speaker 1: O and Adam was basically like, that's not going to happen.
Speaker 1: So Massa told him at that point, it's going to
Speaker 1: go very badly. And the meeting ended, and as far
Speaker 1: as I can tell, that's the last time the two
Speaker 1: of them sigh each other. So Adam left that meeting
Speaker 1: determined to keep going down the I p O path.
Speaker 1: It was after that meeting that Massa probably thought, Okay,
Speaker 1: we need to figure out a way to get this guy,
Speaker 1: you know, to get him to resign. Massa wasn't alone.
Speaker 1: Some members of We Worked board were starting to think
Speaker 1: the same thing. We'll be right back, okay. So We
Speaker 1: Work was barreling toward an I p O even though
Speaker 1: it's S one had been widely criticized, but the company
Speaker 1: had a big problem. Adam was meeting with investors and
Speaker 1: they didn't want to buy We Work stock. Here's my
Speaker 1: colleague Jillian again, he meets investors. None of them are
Speaker 1: two enthused with what they hear. A lot of the
Speaker 1: feedback is negative. Nobody wants to buy the company at
Speaker 1: evaluation of forty seven billion, So immediately it starts dropping
Speaker 1: and dropping and dropping. It ends up looking like a
Speaker 1: falling knife. The valuation targets are continuing to decline. What
Speaker 1: I'm hearing is the demand is not there at this point.
Speaker 1: At even billion, the company's IPO evaluation could be slashed
Speaker 1: to ten to twelve billion dollars, a huge drop from
Speaker 1: the forty seven billion. If you're working at we Work,
Speaker 1: I don't think this is fun at all. Every day
Speaker 1: now they're trying to come up with something to salvage
Speaker 1: this I p O, and I don't know if they're
Speaker 1: gonna do it. Remember just a few months ago, bankers
Speaker 1: were telling we Work that they could go public at
Speaker 1: a hundred billion dollars, and now we Work was considering
Speaker 1: sad numbers like ten or twelve billion dollars. And this
Speaker 1: wasn't just hurting Adam. If you think about we work,
Speaker 1: a lot of the employees had stuck or promised that
Speaker 1: we promised stock options. They thought they were going to
Speaker 1: become paper millionaires. So the valuation of the company dropping
Speaker 1: this much, their wealth is evaporating in their eyes. If
Speaker 1: you think of Adam, he had, you know, already become
Speaker 1: a paper billionaire. He was very rapidly becoming a much
Speaker 1: less wealthy paper billionaire. Two things happened next. One, the
Speaker 1: company delayed its I p O a few weeks. That's
Speaker 1: a sign the company wasn't feeling ready. And then the
Speaker 1: Wall Street Journal published a really embarrassing story about Adam.
Speaker 1: It detailed some of his weirder, more reckless behavior. Probably
Speaker 1: the most memorable anecdote was about Adams smoking weed on
Speaker 1: a private plane that was headed to Israel and had
Speaker 1: this great first line, Adam Newman was flying high. Literally.
Speaker 1: That's Elliott Brown, the reporter who wrote the story, and
Speaker 1: he said that Adam hot boxing and jet had gotten
Speaker 1: the most last. But the significance was that the CEO
Speaker 1: of a well known company had smuggled a sizeable chunk
Speaker 1: of weed across international borders, which is illegal. It's not
Speaker 1: that he was smoking pot on the plane, it's that
Speaker 1: he was bringing it across an ocean to a different country.
Speaker 1: So much so that the owner of the jet was
Speaker 1: really freaked out about this and uh decided to recall
Speaker 1: the plane, leaving Adam to find his own way back
Speaker 1: find his own way back from another continent. The rest
Speaker 1: of the story had some bizarre details as well. It
Speaker 1: said Adam had told people he wanted to live forever,
Speaker 1: to become a trillionaire, and to run for president of
Speaker 1: the world. This was definitely within this broader concept of
Speaker 1: a messiah complex that you know, he had these giant
Speaker 1: ambitions to put we work around the world and then
Speaker 1: ex the and into elevating consciousness. Uh. This is one
Speaker 1: of those those messianic, really expansive visions that has absolutely
Speaker 1: nothing to do with subleasing real estate or office space. Uh,
Speaker 1: and sort of flows naturally out of his mouth. The
Speaker 1: story made Adam sound pretty nuts among certain circles. Everyone
Speaker 1: was reading it and laughing about it. But you know
Speaker 1: who wasn't laughing Massa, here's Sarah again. The pot thing.
Speaker 1: It doesn't feel that bad here in the US because
Speaker 1: so many states have legalized pot, and there's this big
Speaker 1: public debate about whether pot should still be a classified substance.
Speaker 1: None of that's happening in Japan. Masa is pretty conservative,
Speaker 1: and so to have one of his CEOs with an
Speaker 1: illegal substance on an international flight, that's just something he's
Speaker 1: going to take much harder than than perhaps a compartable
Speaker 1: investor would here in the US. So the next week
Speaker 1: is probably the most momentous week of Adam's professional life.
Speaker 1: That Wall Street Journal story came out on a Wednesday.
Speaker 1: Things were getting tense between we Work and soft Bank,
Speaker 1: and during this time, Adam was photographed walking barefoot on
Speaker 1: the sidewalks of Manhattan. The photo was shared widely and
Speaker 1: mocked on Reddit. People held it up as a sign
Speaker 1: that Adam was losing it. On Friday, Adam piled Rebecca
Speaker 1: and their five kids into a car. They drove to
Speaker 1: the Hampton's, where the Newman's owned two houses. As soon
Speaker 1: as the sun set on Friday, they started to observe
Speaker 1: the Jewish tradition of Shabbat that means spending twenty four
Speaker 1: hours unplugged, no technology, no phones, no news. Shabbat ended
Speaker 1: on Saturday night and on Sunday him headed back to
Speaker 1: New York City. A lot had happened while he was gone.
Speaker 1: That day, story started trickling out, saying that some of
Speaker 1: Adam's biggest backers were meeting to discuss how to push
Speaker 1: him out as CEO. They were turning against him and
Speaker 1: wanted him out of the company he'd spent the last
Speaker 1: decade building, and the most painful part of it might
Speaker 1: have been that even Massa, Adam's most loyal supporter, wanted
Speaker 1: him to step down. The story said the plan was
Speaker 1: to remove Adam, and probably very soon. That afternoon, Adam
Speaker 1: met with Jamie Diamond, the head of JP Morgan, who
Speaker 1: was not only an investor but also someone Adam considered
Speaker 1: a mentor. He told Adam to step down. That night,
Speaker 1: Adam had dinner at a restaurant with a board member
Speaker 1: and an early investor. The message was the same, Adam,
Speaker 1: you have to go. What happened the next morning on
Speaker 1: Monday depends on who you ask. Some sources say Adam
Speaker 1: was calm and spent the day in meetings hammering out
Speaker 1: the details of his succession plan. Others say Adam was
Speaker 1: anything but calm, that he started shouting at board members
Speaker 1: when he realized his time was up, but by Monday
Speaker 1: night they had all agreed Adam would go. That evening,
Speaker 1: Adam returned to his town house near Grammercy Park. Inside
Speaker 1: there was a group of people waiting for him, friends,
Speaker 1: co workers, people who wanted to be there for him.
Speaker 1: Someone described it as sitting shiva, which is the Jewish
Speaker 1: tradition of grieving. On Tuesday morning, Adam dialed into a
Speaker 1: conference call. There was no arguing, it was already over.
Speaker 1: One by one, the board members voted to remove Adam
Speaker 1: as CEO. When it was his turn, he voted against
Speaker 1: himself too. When the company announced it, it was a
Speaker 1: huge surprise. It's like if you watched Survivor and you
Speaker 1: know one of the main contestants put their own light
Speaker 1: out and voted themselves off the island. He was exiting
Speaker 1: himself from the company he created. So Adam is out.
Speaker 1: Rebecca resigned as well, and almost immediately it felt like
Speaker 1: there was a move to wipe the company clean and
Speaker 1: get rid of everything related to Adam. They closed Rebecca's
Speaker 1: passion project We Grow, which was the school they had
Speaker 1: opened with their own children in mind. Within just a
Speaker 1: couple of days, several executives who were close to Adam
Speaker 1: and Rebecca, either through family ties or friendship, left. We
Speaker 1: Work announced they were going to close down some of
Speaker 1: their side businesses and sell off some of their acquisitions.
Speaker 1: Less than a week after Adam stepped down, we Work
Speaker 1: officially withdrew its I p O office space startup We
Speaker 1: Work has officially postponed a plan to go public. The
Speaker 1: decision came less than a week after controversial co founder
Speaker 1: Adam Newman stepped aside a CEO. We Work as withdrawing
Speaker 1: its I p O prospectus. They are saying in a statement,
Speaker 1: we have decided to postpone our I p O to
Speaker 1: focus on our core business, the fundamental of which remain strong.
Speaker 1: Holy Cannoly, has it been a rough quarter for I
Speaker 1: p O? So how do you say this? Well? I
Speaker 1: see this as math math wins. That's that's what And
Speaker 1: the company was in a dire situation. It turned out
Speaker 1: that we Work was going to be running out of
Speaker 1: money in just a month or two. So We Work
Speaker 1: was planning to do big layoffs, but they were so
Speaker 1: cash strapped that they couldn't afford to pay the severance.
Speaker 1: That's really awkward. You need to lay off a bunch
Speaker 1: of workers in order to cut expenses, but you can't
Speaker 1: even afford to do it. Yeah, I don't think we
Speaker 1: realized how bad it was until that very point, that
Speaker 1: the company was actually going to run out of cash
Speaker 1: as soon as Thanksgiving if they didn't seek out some
Speaker 1: sort of rescue package. And soft Bank came to the rescue.
Speaker 1: They were going to give the company enough cash to
Speaker 1: keep We Work from going belly up. But we worked
Speaker 1: new deal with soft Bank also gave them a new valuation,
Speaker 1: and it was much much lower than it used to be.
Speaker 1: We Work was now valued at just eight billion dollars.
Speaker 1: Just to put into perspective how insane that turn of
Speaker 1: fortune is. Just a couple of months earlier, Banker said
Speaker 1: the company could be worth a hundred billion dollars. The
Speaker 1: IPO fiasco vaporized an amount of money equivalent to the
Speaker 1: GDP of Latvia. And to make things even weirder, SoftBank
Speaker 1: had invested more than ten billion dollars and we Work
Speaker 1: at this point, So they put in ten billion dollars
Speaker 1: to help build a company worth eight billion dollars. It's
Speaker 1: almost as if they created negative value. Soft Bank used
Speaker 1: this rescue package. To buy up even more of we work.
Speaker 1: So in exchange for the rescue package, soft Bank is
Speaker 1: set to own eighty percent of we work. Remember, they
Speaker 1: used to only earn less than a third, so right
Speaker 1: now they've doubled down on their investment. They basically how
Speaker 1: we work, and they're in. The driver is sayed about
Speaker 1: the company's future. So Adams out and Masa is in.
Speaker 1: SoftBank owns a majority of we work at this point.
Speaker 1: And the most notable thing about the soft Maank bailout
Speaker 1: was that it came with an extremely generous exit package
Speaker 1: for Adam himself. He had already stepped down a CEO,
Speaker 1: and now he was agreeing to leave the board and
Speaker 1: give up his influence over the company. In exchange, he
Speaker 1: was given a lot of money. It made employees pretty angry.
Speaker 1: One of them even told me they considered it a
Speaker 1: platinum parachute. So in exchange for walking away, Adams getting
Speaker 1: a one point seven billion dollar package, and then probably
Speaker 1: the most outrageous bit to everyone was a hundred and
Speaker 1: eighty five million dollar consulting faith that he was just
Speaker 1: getting cash, straight up cash, straight up cash, and employees
Speaker 1: were pissed. They felt like Adam was walking away with
Speaker 1: this chance at more than a billion dollars and they
Speaker 1: were likely to get laid off. It was just, you know,
Speaker 1: they were fuming. On Slack. There was this channel called
Speaker 1: i PO Talking News where employees had been venting about
Speaker 1: how everything had been going wrong, and we actually saw
Speaker 1: some messages of it and ran a story about it. Yeah,
Speaker 1: we reported that a news article about Adam's golden parachute.
Speaker 1: True more than a hundred thumbs down emojis from employees
Speaker 1: and workers were just really unhappy that we Work couldn't
Speaker 1: even afford to lay them off. But then this guy,
Speaker 1: their former CEO, was walking away with such a bundle
Speaker 1: of cash. One someone posted on Slack, so we're too
Speaker 1: broke to pay employees severance, but Adam gets two hundred million,
Speaker 1: And then another posted a photo of the orphan from
Speaker 1: Oliver Twist with the caption please Massa Yoshi's son, can
Speaker 1: I have some severance? You know? To me? After spending
Speaker 1: years covering we Work, which then became the Wee Company
Speaker 1: and has all these slogans about being battered together and
Speaker 1: being part of a team. It was this kind of
Speaker 1: dark twist at the end that after Adam burned everything
Speaker 1: and set the company kind of in flames. He walks
Speaker 1: away with all this, all these rewards just for himself.
Speaker 1: It really felt like it went against all the things
Speaker 1: that he had been talking about on stage for so long. Yeah,
Speaker 1: he had created such a big, strong sense of community,
Speaker 1: and then really, instead of it all being about a way,
Speaker 1: it all became about him. So the We Work I
Speaker 1: PO had made a complete one eight. It started out
Speaker 1: as this exciting, hopeful event that everyone We Work employees, bankers,
Speaker 1: investors was going to get rich off of, and in
Speaker 1: just a couple of months it fell to the ground
Speaker 1: in a fiery crash, and the only person who seemed
Speaker 1: to walk away with a reward was also the person
Speaker 1: arguably most at fault, Adam. All of a sudden, Adam
Speaker 1: had become a legend, someone people recognized and mocked and impersonated.
Speaker 1: Wanted posters with his face on them, even appeared on
Speaker 1: lamp posts around New York City. I went to a
Speaker 1: Halloween party later that month and there were floor Adam
Speaker 1: Newman's walking around. So one thing, they all weren't wearing
Speaker 1: his shoes, because he's pretty well known. Her walking around barefoot.
Speaker 1: Um three of them had wigs. One just had the
Speaker 1: Adam head down pat and all of them were wearing
Speaker 1: these T shirts with the fund made by Weight in
Speaker 1: different colors that he's been photographed presenting. A couple of
Speaker 1: them had a cheeky blazer on top, and two had
Speaker 1: soft Bank checks stuffed in the top pocket. Oh my god,
Speaker 1: I remember seeing photos on Twitter of people dressed up
Speaker 1: as Adam Newman for Halloween. It was just that timing
Speaker 1: where it was a big news story right in the
Speaker 1: middle of October. Yeah, I posted a photo on Twitter
Speaker 1: that Bloomberg TV actually ended up using. Adam had turned
Speaker 1: into a huge joke. And what about Massa, the person
Speaker 1: who once believed in him so earnestly? What was he
Speaker 1: thinking about all this? About a week later, at an
Speaker 1: earnings presentation for soft Bank, Massa stood on stage and
Speaker 1: talked about Adam. He wasn't usually candid. He said he
Speaker 1: had made a mistake in judgment, that that evil. He
Speaker 1: has many strengths and flaws all mixed together. I probably
Speaker 1: focused too much on his strengths. That's something I regret
Speaker 1: very much. He had many negative sides, and I overlooked
Speaker 1: many of them. I regret that, especially the governance problems,
Speaker 1: so Massa said publicly that he had ignored many of
Speaker 1: Adam's shortcomings, and he regretted putting so much trust and
Speaker 1: money in Adam. This was a moment when so many
Speaker 1: people started asking what kind of person is Adam Newman?
Speaker 1: Was he an evil genius fooling everyone all along, a
Speaker 1: failed visionary who couldn't make it work, or just some
Speaker 1: guy who lucked into becoming a billionaire and who was
Speaker 1: to blame for all this wreckage. A lot of people
Speaker 1: thought it was Adam's fault, but others pointed the finger
Speaker 1: at banks and investors for giving him boatloads of money
Speaker 1: and never holding him accountable. In the next episode, will
Speaker 1: look at the shattered ruins of we works, I p O,
Speaker 1: disaster layoffs, toxic phone booths, another brutal battle between Adam
Speaker 1: and Masa, and a worldwide pandemic that cast doubt on
Speaker 1: the entire concept of coworking. That's next time on Foundering.
Speaker 1: Foundering is hosted by me Ellen Hewitt. Sean When is
Speaker 1: our executive producer, by Aquaba is our associate producer. Ray
Speaker 1: Mondo makes the show today. Mark Million and Vandermay and
Speaker 1: Alistrabar are our story editors. Francesco Levi is the head
Speaker 1: of Bloomberg Podcasts. Be sure to subscribe, and if you
Speaker 1: like our show, leave a review. Most importantly, tell your
Speaker 1: friends see you next time.