• Gray Matter

WeWork CEO mixes work and play

The Wall Street Journal is reporting that WeWork's CEO, Adam Neumann, has made non-core investments in company's that speak more to his personal ambitions, rather than fitting well into WeWorks overall corporate mission.

Mr. Neumann is another example of a recent company that has grown into a massive unicorn, all while staying private. Public investors would be less tolerant of this type of activity and we wonder if Mr. Neumann would engage in this type of behavior had the company gone public. We do not think so.

dog dressed as a pink and gold unicorn
A Unicorn can be distracting and not always truly a unicorn.

This situation brings into view the larger question of share/capital structure. WeWork currently has a stock structure that allows Mr. Neumann to retain voting control over WeWork even with a small amount of actual equity. Reminds us of SNAP and we all see how well that has worked.

When a CEO begins to mix work and pleasure it is never a good thing. This emboldens them to continue to push the envelope and they become distracted. Just last year WeWork spent $60MM USD on a Gulfstream jet that the CEO uses on a regular basis. Mr. Neumann is an avid surfer and now WeWork has invested in a surfing wave-pool manufacturer as well as a fellow surfers food company. At the urging of his wife, Mr. Neumann had Wework create a school in NYC where his 5 children could attend.

If Mr. Neumann is making such brazen moves in public, it only makes one wonder what he could be doing in private. So what are investors to do? There are really only two ways to combat this type of behavior: oversight and due diligence.

Gray Matter specializes in fact-checking and testing information. Having an independent third party providing due diligence for a company, firm, etc. can make all the difference. People act much differently when they know outsiders are scrutinizing their every move. Maybe this is exactly what Mr. Neumann needs? An outside independent third party reviewing decisions before they are allowed to happened. The board of WeWork seems to be asleep at the wheel or in his pocket. This should make the other investors very worrisome and push for more oversight and due diligence. We have been on engagements of this nature before and it does not take long for the affects to be seen.

If you are an investor in an organization having this problem we hope you know see what needs to be done. A distracted CEO chasing personal ambitions adds no value to the enterprise. They need to be refocused and know that an independent third party will be providing oversight. Only then can your investment begin to grow again.

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