Large private companies are often characterized by poor corporate governance that harms an array of stakeholders. WeWork provides a recent, high-profile example of such harms. The WeWork vision, and the dominating personality of its co-founder, Adam Neumann, attracted billions of investment dollars. As a private company with a valuation in excess of $1 billion, WeWork was a “unicorn.” In January 2019, WeWork was valued at $47 billion, and SoftBank alone had invested more than $9 billion.
In August 2019, however, a draft of the company’s Form S-1 registration statement was made public. Analysts and the financial press raised serious concerns. The filing revealed an aggressive multi-class voting structure, and an equally bold assessment of profitability reached through very creative accounting. WeWork scrambled to make changes, but the weaknesses proved too much. The IPO was cancelled; valuations were adjusted down to between $8 and $10 billion; SoftBank took control by injecting another $9.5 billion, approximately $1.7 billion of which was to be used to remove Neumann; and a new management team was installed, putatively to turn the company into a model of responsible corporate governance. Thousands of employees were laid off and collateral businesses were sold or shuttered.
