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WeWTF, Part Deux

Scott Galloway@profgalloway

Published on September 20, 2019

So, the mother of all party crashers took a dump in the We IPO punch bowl. The crasher? Math. The autopsy will show the shelving of this IPO was death by S-1. 

This was a case of immunities kicking in after the requisite SEC disclosure. As the greater fool theory has hit a wall, We will now need additional capital from the private markets, who are no longer under the influence. The firm will be forced to sell equity/issue debt at a price substantially lower than they had anticipated. A price unimaginable just 30 days ago. 

We has gone from unicorn to distressed asset in 30 days. In just seven days, We lost more value than the three biggest losers in the S&P 500 have lost in the last year combined: Macy’s, Nektar Therapeutics, and Kraft Heinz.

So, as a distressed asset, the playbook is fairly clear:

• Bring in new management. What got We here, isn’t going to get it where it needs to go. Each layer that comes off the We onion stinks more and more. The media has turned its attention to the Neumanns, and it’s as if the lights have been turned on at a cocaine-fueled party that ended several hours too late. Everyone and everything suddenly looks bad, scary even.

• The firm needs to bust a move to break even pronto. The new CEO should be from a REIT, ideally a hospitality or commercial real estate REIT. My vote is Adam Markman, CFO of Equity Commonwealth — Sam Zell’s firm.

• Shed/close all non-core businesses. WeGrow and WeLive are vanity projects. As someone close to the firm told me yesterday, they distract Mr. Neumann from the core business, where he was wreaking havoc. A $13 million investment in a firm that makes wave pools to indulge Adam’s passion for surfing. Really? Really?

• Raise money after an adult conversation with SoftBank (“You f*cked up, you trusted us. Do you want to participate in the next round or get washed out?”)

• Focus on margin expansion vs. growth. We has a differentiated product in the marketplace, and should command a premium.

• Lay off all employees not directly tied to managing the core business. Reprice options for remaining employees, as the current options are now worthless and most execs will begin looking for other jobs. The most talented (the ones with the most options) will be the first to leave if they aren’t given substantial economics for staying in Saigon as the North Vietnamese roll into town.

• 3-5 new independent directors. Boards have their own dynamic, irrespective of the qualities of the individuals. The members of this board have formidable experience/CVs. Lew Frankfort (Director) is a first-ballot Hall of Fame retail exec, and he doesn’t strike me as the type of guy who’d be bullied by the CEO, or anybody else for that matter. Again, I just can’t figure out what the f*ck happened here. Who is the head of the audit committee, and was he (they were all dudes until last week) the one passing out MDMA before each audit meeting? Or, as a private firm, did they even have audit committee meetings? This is a board that approved a $13 million acquisition of a wave pool company. Or did they?

The directors enabled an information pyramid scheme and indulged Adam, in exchange for hoping they could create enough valuation momentum, via nine rounds, to carry their shares to an exit in the public markets. 

• SoftBank was reportedly considering propping up the IPO with $750 million in share purchases at the offering price. If that’s the case, shouldn’t they want to invest billions more at the now low-low 80%-off price? Or were they simply looking to pump and dump?

The above likely won’t happen. Why? As I said two weeks ago, the lines between vision, bullsh*t, and fraud are pretty narrow. I can’t wrap my head around what’s gone on here. Something is wrong. Something stinks. Something … Just. Doesn’t. Add. Up.

It’s beginning to smell like malfeasance at We. The lines between vision, bullsh*t, and fraud have been crossed here. To be clear, I’m not a journalist, nor a forensic accountant. This is pure speculation based on my experience as a CEO, investor, and director. Something is very, very wrong here. In no specific order:

• The board’s willingness to sell shares at 75% off (after seven days) says insiders knew the firm desperately needed money, and the price they advertised seven days before was not a real number (see above: malfeasance). 

• Cult of personality firms seem especially vulnerable to massive declines in value or fraud. If you had to pick an analog for Adam Neumann (young, charismatic, visionary, with an outsized view of himself and a delusional view of the firm’s role in society), surrounded by gravitas/old white guys, who/what is more fitting than Elizabeth Holmes/Theranos? 

• At the most recent all-hands (after the shelving of the IPO), Adam refused to take questions. Mr. Neumann is a narcissist, and to not indulge in a chance to spread more Adam means he’s now being advised by lawyers (“stick to your talking points, don’t say anything else, don’t take questions”). A bad sign.

If you liked the Theranos documentary The Inventor: Out for Blood in Silicon Valley, you’ll love Community-Based EBITDA: The Story of We, coming soon to Hulu. 

At some point, tech’s gestalt of overpromise and underdeliver can paint founders into a corner where they begin massaging numbers (Earnings Before Gluten). I can relate to this. In ’99 I raised money from Howard Schultz (SBUX), Goldman Sachs, JPM, and a bevy of high-profile business people for an e-commerce incubator, Brand Farm. The company made no sense. But it was ’99, and a guy with some success, a good rap, and a shaved head could raise tens, if not hundreds of millions. My investors were nothing but supportive. 

Bottom line, I didn’t have the courage/stomach to try to raise a B round, and I shut Brand Farm down. I was going to need to go “large” and spin our way to a $100 million round, and there was interest. But I was having trouble sleeping. When I get stressed, I stop eating. The correct diagnosis of my ailment was common sense mixed with a conscience. We’s mission to “elevate our consciousness” is sounding more apt with each WSJ story (some great reporting). 

In sum, I can see how one gets in too deep and begins believing his or her own bullsh*t, almost as a defense/coping mechanism. I speak from experience: if you tell a thirty-something dude he’s Jesus Christ, he’s inclined to believe you.

We has consistently been so far off on any forecasts in their original pitch deck that it appears numbers are more of a nuisance than reporting metrics. Their forecasted profits: $14 million for 2014, $64 million for 2015, $237 million for 2016, $542 million for 2017, and (wait for it) $1 billion for 2018.

Except in 2018 the firm lost $1.6 billion, which is likely understated. SoftBank is the only investor since 2016, a rookie move in the world of investing. The lack of external, third-party validation can lead to everyone smoking their own supply, and more poor governance. Henry Hawksberry (pen name I think) wrote a blistering piece on Medium alleging, among other things, We was paying brokers 100% commissions, then figuring out how to turn expenses into revenues and pulling forward billables. If half of this is true, it’s fraud.

Ok, the wolves are closing in. What to do? I know, we’ll provide an exclusive to a network that throws us softball questions and provides a veneer of legitimacy. CNBC, that’s the ticket. We’ll distract from the boring stuff, like numbers, and bring with us early tech investor Ashton Kutcher. The third and and a half man is masterful and, sitting next to Adam, raptures:

“I realised it was a technology company. I also realised that this company, through its technology, has greater capacity than any other company in the entire world to bring people together.” Really, Ashton, really? Aren’t misleading metrics and nomenclature just non-carbonated fraud?  

Why. Would. They. Leave?

The two most senior corporate communications exes, Jennifer Skyler and Dominic McMullan, both left recently, right before the IPO. Ok, so think about that. You are the belles of the ball of a firm about to IPO at $50 billion, and (in the case of Dominic) you announce, weeks before the IPO, “After becoming a dad (twice) in recent years, I’ve decided to take time off to spend with family in Brooklyn for now.” Yep, that makes sense. You know us men, always leaving right before the IPO to spend more time with our families. 

The head of comms, Jennifer Skyler, left a few weeks ago for AMEX. Uh huh, that makes even more sense. Who wouldn’t want to bolt from the second-most-anticipated IPO of the year to go flack about the new American Express Marriott Bonvoy Brilliant Card. What’s worse than spending all day every day at home with two baby boys or downtown at AMEX? Engaging in fraud.  

How did this happen?

A frothy market coupled with our gross idolatry of innovators creates an ecosystem that enables incremental disingenuous acts such that, if We had gotten public and managed to spend their way out of this hole, they might be lauded as “visionary.” What if Ms. Holmes had been able to raise another $2 billion and the technology had begun to show promise? Wouldn’t she be on Oprah and CNBC, instead of HBO? 

We’ve witnessed a halving of journalists since 2008, while the number of corporate communications execs has tripled. In sum, the ratio of bullshit/spin to watchdogs has increased sixfold. In the last 24 hours, I’ve been contacted by the BBC, WSJ, and WaPo to comment on We. But before any press outlet contacted me, I heard from a senior comms person at We, after I mentioned on Pivot in January that WeWork will be in the news a lot in 2019, for all the wrong reasons. Below is an email exchange I had with them in May. The subject was “Whipping Boy.”

As a general rule, I return the call of every journalist and refuse to meet with any corporate communications exec. 

The halcyon of the markets coupled with feckless regulatory bodies and the decimation of investigative journalism has made the markets ripe for fraud. We is falling off the tree. 


  • In the next 30 days, a series of explosive investigative journalism pieces will document breathtaking malfeasance at We.
  • In the next 60 days, a state attorney general, SEC, or other regulatory body will launch a formal investigations into We.
  • Over the next 12 months, SoftBank’s Vision Fund will be shuttered.

The Learning Here

There are lessons to be taken from the story of We. One that’s received less coverage is what young, successful people should take away. You, and your success, are meaningful. You can build economic security for yourself and others, and create great things. But humility, and a recognition that nobody is bigger than the market, is profound. Last night after dinner with friends, my wife told me I had boasted about my success, and that it was wrong. This hurt … I mean hurt, because it was true. 

Some modest success, people who love me, and I’m still insecure. 

This morning my youngest, unable to acknowledge how important I am, refused to put on his shoes. He does this a lot. So, today, outside the third grade class at Gulfstream School was a 54-year-old man promising to take his 9-year-old to the Super Target after school if he’d just put on his second shoe. We all have meaning. None of us is profound.

Life is so rich,

P.S. Back to doing weekly videos — this week we asked, could Microsoft Teams be the end of Slack?



  1. Eduard Lazar says:

    Great dissection of the unicorn state of affairs. Thanks for digging this well, many of us are really thirsty, great articles. Eduard

  2. PHILIP LAY says:

    I always enjoy these irreverent but spot-on articles! Best regards, Philip Lay

  3. John Goltermann says:

    This is the natural consequence of the Fed flooding the system with too much liquidity. Too much cash leads to a shortage of sense.

  4. Robb Gutowsky says:

    Hi Scott: First time reader, first time writer. Made. My. Day. Thanks! I was in my 30’s and in MBA school when Netscape’s IPO launched. Seems like that’s when it all started. Any thoughts?

  5. David says:

    It’s nonsense to allow firms to co-opt ordinary words and trade under them. “We” is pretty much the peak of nonsense. Well you can’t do anything about that. But we could have a go at reducing the stumbling imposed on the reader when “we” repeatedly sets up the wrong expectations. How about just rendering “We” in italics (no inverted commas – too fussy) to warn the reader not to parse “We” as We, and save the constant work of recovering?

  6. Njonjo Ndehi says:

    There’s a delivery company here in Kenya that gave me a coupon equal to 1/4 the cost of my pizza. I declined to use it because it means screwing someone’s pension savings in USA without his or her consent.

  7. Earthtone says:

    WeWork was/is a good/decent/brilliant idea. A better postmortem would be to analyze, how with some modesty and patience, it could have become a respected new wave enterprise.

    • lovealwaysbette says:

      Why was it a brilliant idea? The premise of WeWork was a glorified middle man, they didn’t own the real estate and they didn’t have any skin in the companies they “hosted” — they were subleasing in a hot market anticipating they could cripple the landlords if the market went soft on their long term leases because they’d be the only tenant in town. Which is narcissistic. The landlords would have happily caught wise, hired some upstart marketing firm, cut their losses with the middle man and marketed the office space themselves for short duration leases while the economy rebounded

  8. David A Reavis says:

    Gullibility is not solely the province of the Young. Look at how many retirees buy a timeshare!

  9. Ken Berger says:

    I still think you are doing them a favor by stating the base assumptions here that the IPO goes out at all.

  10. Sharon says:

    Who knew finance could be so entertaining? Please, don’t stop.

  11. Adam says:

    Scott Man, you are COURAGEOUS and thank you, thank you, thank you. As a middle aged human I was losing hope that everyone in a position like yours was in on the (some) obvious unicorn fraudsters by being silent, being complicit. Why speak up, right? BUT YOU DO! Did I say thank you.

  12. rick burns says:

    Your dedication to your family is exemplary; our children grow up fast. Family is first!

  13. Nikos Balamotis says:

    Another Theranos? How fast we forget….

  14. Bilal says:

    Love the article and keep up the great work Scott!

  15. Jeff says:

    I guess Cuban’s call-out 3 years ago that much of VC investing was a big Ponzi scheme was very accurate.

    • lovealwaysbette says:

      with the sad realization that the “public market” is their personal piggy bank, dupe the masses with a flashy name and secure the private investment is repaid

  16. Dan says:

    Nothing teaches a lesson better than natural consequences….he goes to school with only one shoe.

  17. ML says:

    This is very true, you should also check out a company called “Selina”, they are exactly the same, C-suite furnishes themselves, uses investors funds as a piggy bank, wide spread, malfeasance at its peak. Corporate culture is rotten to the core, We and Selina are both a combination of Animal Farm and Lord of the Flies.

    • ML says:

      I would not be surprised if a lot of supposed TECH and Real Estate start restructuring as a result of this.

  18. Isaac says:

    What’s going on at Kraft/Heinz??

  19. Sacker of Cities says:

    We need to look at substance over form here. Basically, most of these Silicon Unicorns are just a new rendition of a Ponzi scheme (I know everything is a Ponzi scheme but bare with me). In a Ponzi the first money is paid out with the new money, but with these Unicorns you have the first money becoming more valuable with the second round due to an increase in their so called valuation even though they are making no money and there is not a financial metric on this planet to support the valuation. This process goes on with the third fund raise and even higher valuation. Fund raise one and two are rubbing their hands with the increase in their value and can’t wait for the IPO and dumping the stock on the public. So a Ponzi scheme wrapped inside a market manipulation pump and dump scheme. I have successfully turned around four public companies (two which everyone including Deloitte said they needed to go BK — of course their mouth was watering over the fees) and We looks unsalvageable to me. I would say anything that is coming out of Silicon Valley which has a BS valuation and is not making money is the same.

  20. Joe Syndication says:

    Pls add an RSS feed. Thx

  21. SJ says:

    These emails make my day every time.

  22. Adam Wright says:

    Dude, who have got- got- to be a larger voice in our economic system. Cabinet level in the Warren cabinet?

  23. Gustavo Lopez says:

    great article man

  24. Tyler McArthur says:

    You have a gift for being savagely insightful and laugh out loud funny at the same time. This was amazing, and thank you for writing it.

  25. James says:

    Gee, Weworks sounds like they are already Jeff Immelt and GE!

  26. Gavin Chong says:

    This is brilliant writing. Love this, your work, and please keep it up. We all could use some sanity and reality check.

  27. Ozijoe says:

    You’re a legend Scott Galloway

  28. Robert Sullivan says:

    “Or were they simply looking to pump and dump?” Wasn’t that the brilliant (and seemingly stupid but it worked) scheme of Jordan Belfort? The Wolf of Wall Street is back?

  29. Yuva Viswanathan says:

    Hi Scott, love the website, your work, your writing and your perspectives on the Horsemen and We. I would like to know if there is any condition in which WeWork would become a sound company and a worthy investment. Assuming they got their corporate governance right, focused on balancing their books and on long term mature growth, could they still dominate the office share/co-work industry. They do have a valuable and recognisable brand.

  30. Luis says:

    Brave and brilliant, as usual.

  31. Robert Nadler says:

    A brilliant expose of the juvenile financial predations of an ego-fuelled fantasist. However, none of this could have been possible without the support of the usual Wall Street suspects, adding credibility to a piece of loo-paper. They clearly don’t do any real due diligence, or they’d never have gone near this house of cards, but their greed really does make them blind. They need to be made to suffer for their venality and not be allowed to slink away back to the gilded gutter they came from without being exposed for their complicity.

  32. JC says:

    Scott. Thank you for the insight. There’s learning here for the Boards I care about and the kids I care about (one of them is a We employee). Please get your own podcast. Jim

  33. DW says:

    Your suggested replacement Adam Markman…An insinuation that the ‘adults’ should step-in and dismantle the company?

  34. SP says:

    Saigon? (You’re younger than you think😊)

  35. Zeke says:

    OK, we’ve got it. It has been the Pivot, NYT, and NM/NM topic for weeks. Surely there are other issues?

    • Jack says:

      No, plainly “we” do *not* “got it,” else this charade would have crashed and burned three years ago. This needs to be repeated loudly, ad infinitum and ad nauseaum.

  36. JOHN K THOMPSON says:

    Perhaps we are wending our way towards the end of the investing in stupid concepts, and their founders who think that they are all that and more…..maybe.

  37. Paul says:

    Prof, great piece thank you. The problem is there is zero route to profit for them. Their leases are top of market and their rates are very low. If they raise rates their clients will flee. They have rented way below cost, for these deals to wash through will require a year or two plus new clients willing to pay 40% more. Many locations will simply never work, you can’t open just one or two locations in a new country, it’s not worth the currency risk, accountants, lawyers fees etc. much of their space will end up back with their landlords. Plus…. which Fortune 500 real estate director is going to sign off the next full floor deal with wework when tomorrow there could well be a massive scandal, court case etc. love your work. I’m a 22 year industry veteran.

  38. Gilad Amozeg says:

    The arranged marriage of Holmes to Neumann is sealed the deal.

  39. Ecoute Sauvage (pseudonym) says:

    Saigon, not Hanoi.

  40. Luis Merchan says:

    Best closing sentence. Thanks for the perspective!

  41. Alejandro Brito says:

    Fantastic read Scott. You called it early here. Best, Alex

  42. Jim Milbery says:

    Enjoyed the piece and the nice use of Balsamiq Mockups for the graphics.

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