"Google me."
That's what WeWork's co-founder Adam Neumann, portrayed by Jared Leto in the new Apple+ limited series "WeCrashed," tells a Chase retail branch banker in 2017 when he asks for a $50 million line of credit despite having $43,000 in his personal banking account.
The series' fifth episode then puts Neumann in the office of JPMorgan Chase Chairman and CEO Jamie Dimon, who grants Neumann a $100 million line of credit. In this dramatization, Dimon informs Neumann he is now an ultra-high-net-worth individual. Stop reading now if you haven't seen the fifth episode, titled "Hustle Harder."
The WeWork leader is then shown going on a buying spree, making a $15 million cash offer on a house with his wife Rebekah, portrayed by Anne Hathaway, and buying a private jet to help him navigate the world as he rapidly expands the business, adding 13 cities in 2017 and doubling the company's worldwide footprint. The fourth episode ended with Japanese giant Softbank investing $4.4 billion in New York City-based WeWork, giving the business the cash to rapidly expand the business, it seems, at all costs.
I watched the latest episode with Evan Stone, managing partner of Dallas-based Goodwin Advisors, who said WeWork's capital backers, including Softbank, JPMorgan Chase and Benchmark Capital, in the dramatization all seemed to buy into Neumann's vision and bet on the company's rapid expansion plans, fueling Neumann's addiction to growth for the sake of growth alone.
"From the show it would appear Neumann had little of a formal plan and was growing based upon emotional goals that at times were made up on the spot," said Stone, a real estate broker specializing in capital markets. "While that certainly helped spur creativity, it created a financial disaster with an unbridled and undisciplined growth plan," according to the dramatization, at least.
For better or worse, Stone said, capital markets act as a check and balance with market participants on the equity and debt side reviewing numbers and business plans to approve or disapprove with their capital. In the case of WeWork, those checks and balances were not in place, and investors seemingly just gave Neumann money, according to the episode. Not only are they portrayed as investing, but at one point in the episode, Softbank Chairman and CEO Masayoshi Son tells Neumann he's "not crazy enough" with WeWork's growth plans.
WeWork had about 40% of the coworking sector's market share in 2017, and part of the company's growth plans included acquiring competitors such as New York City-based Industrious, which was founded in 2012, and stealing information about customers of other platforms, according to the episode. In the episode, Neumann invites Industrious CEO Jamie Hodari on the WeWork jet in hopes of buying the rival company. When a polite offer is rejected by Hodari, Neumann is shown retorting, "I'm going to crush you. I'm going to destroy your business and your soul."
Prior to the pandemic, executives in the capital markets business noticed office building valuations could be affected by large leases to a coworking company, with uncertainty on how these leases would perform in a recession. The government lockdowns tied to the pandemic brought a sharp decline of occupancy in coworking space, but it also returned just as quickly, Stone said, proving the flexible office space to be resilient and a magnet for workers. Full disclosure: Stone works in a coworking location of Common Desk, which was just acquired by WeWork.
"There is still a question that is in the process of being answered about what the office of the new future is going to be," said Stone, who has been a capital markets broker for decades and previously worked for CBRE and JLL before co-founding his own company in 2020. "We are clearly seeing in real time tenants gravitating toward new and newly renovated buildings. Tenants are willing to pay up for best-in-class space."
Here are some key takeaways:
- Investors were too caught up. Neumann tells investors the company is on track to bring in $1.8 billion in revenue in 2017, never mind the $1.9 billion in losses brought up later by co-founder Miguel McKelvey, as played by Kyle Marvin, in a private conversation with Neumann after the investor meeting. Those financially backing WeWork were found applauding the company's achievements rather than questioning the costs tied to the rapid growth of the company. As Stone said, "Other people were caught up in his vision without those checks and balances."
- Most leaders don't oversee construction details. Neumann travels the globe in the episode — Shanghai, Paris, Warsaw, Oslo — taking a hands-on approach as a company leader to solve construction problems, such as a stairway that leads to nowhere and figuring out a solution for toilets that don't work. "People don't do business this way, with the CEO flying around making sure everything is just right," Stone said. With Neumann focused on construction rather than running the company, that can lead to larger problems. "Investors entrusted him with capital and want him watching over everything, not hyper-focused on specific items," Stone added.
- If you give someone permission to go crazy, they might take you up on it. WeWork was created on the premise of the company "going crazy," which they did, Stone said. "Could they have built the same platform with more traditional financial controls? Maybe not. But they could have potentially built a more profitable and more sustainable one."
- Neumann's wife Rebekah gets more involved with WeWork in the episode. She is shown firing employees for having "bad energy" and pushing her friend Elishia Kennedy, as played by America Ferrera, out of her role at WeWork as its chief branding officer after Kennedy sought to change WeWork's mission statement to center on something more specific than changing the world. Rebekah is shown taking over the role as chief branding officer just in time for a Vanity Fair photo shoot with her husband, setting the stage for the future public face of WeWork.