WeWork went from unicorn darling with a nearly $50bn valuation to a cautionary tale for gullible investors worth just $8bn in a matter of months.
Were investors such as SoftBank and JP Morgan duped by the hype of a charismatic founder, as happened with Elizabeth Holmes and Theranos? As a lecturer in finance and someone who managed investments for 20 years, I believe that there was some of that, coupled with behavioural biases that lead people to make bad decisions.
‘We’ will change the world WeWork was founded in 2011 as a co-working venture, but Adam Neumann crafted and pitched a vision for his company that went well beyond office sharing and real estate.
They fit neatly in the messianic-like Silicon Valley tech world, where companies believe their inventions can actually “Free the world.” Neumann’s ambitious plans hit reality recently as investors soured on the company in the run-up to a planned initial public offering.
On 23 October, existing investor SoftBank agreed to rescue the embattled company with billions in additional capital in exchange for increasing its ownership stake to 80pc. The deal pushed out Neumann, who will get Greg Putnam of the University of North Carolina outlines how WeWork’s highly publicised downfall is actually a common story.
On 23 October, existing investor SoftBank agreed to rescue the embattled company with billions in additional capital in exchange for increasing its ownership stake to 80pc. The deal pushed out Neumann, who will get $1.7bn despite burning through earlier investments.
In cases such as Tesla and Uber, the companies have managed to become successful despite their CEOs’ shortcomings.