An Analysis of WeWork's Fall

1 Analysis of WeWork’s Fall Red Flags Corporate governance is crucial in the smooth running of corporations. As a company that had witnessed tremendous progress over the years, WeWork’s corporate governance had loopholes that led to the failure of its IPO process. The failure in corporate governance was signified by the following. First, the company's CEO, Neumann, had high voting power over the company's ordinary shareholders. For instance, the CEO had 20 votes for every single share he owned at the company. The foregoing explains why he could make decisions without involving key stakeholders in the company, including directors and company managers. The class B and C shares Neumann owned at WeWork gave the CEO extreme decision-making power over the ordinary shareholders. As such, the decision-making process at WeWork needed to be more inclusive, leading to its trouble.

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The second red flag is that the company needed a sustainable profitability plan.

Companies with a good long-term plan can track their performance and ensure every activity is sustainable and improvable. In the case of WeWork, the company was experiencing rapid expansion without a known business model. The dealings of Neumann that gave the company its exponential growth rate could have been more questionable, hence giving the CEO the notion of entitlement at the company. Thus, the lack of a sustainable plan and Neumann's erratic behavior are red flags that could have informed the shareholders that the company was headed for a fall.

The lesson start-ups can learn from the missteps of WeWork is to have a long-term plan and to ensure that the board of directors has visionary leaders who can help the CEO run the operations of the companies with vision.

Long-Term Revenue Plan Long-term revenue is crucial for a company because it will only sustain its operations with revenue. Thus, investors should examine a start-up's long-term profit as provided in the long-term plan to ensure that the company's plan is sustainable. The IPO failure of WeWork can be blamed on the company management and the shareholders. The company management overinflated the company's value, and the investors, without thorough due diligence, decided to invest in the company. The inflation of the company's value may have resulted from the high expectations of investors and the lack of dissenting views on the board of directors because of the high power of the CEO (Saxena, 2019). In retrospect, IPOs are very risky, especially at the onset. Investors should lower their expectations because, at the onset, the price has not yet settled.

3 SoftBank Takeover The takeover of WeWork by SoftBank can either lead to the company's success or collapse. The first step of laying off workers will lead to quick positive spin-offs but only affect the company's long-term success. The company's first step should be to create a solid long-term plan that can lead it to profitability. The second step the company can take to regain public confidence is to re-brand. The current brand needs better taste from the investors. To regain traction in both the short-term and long-term will require the company to re-plan and re-brand to create value for investors.

Reflection The assignment has enabled me to comprehend the risk factors underlying IPOs. Also, I learned that investing in IPOs does not guarantee returns to investors. Therefore, the initial investment in IPOs is considered a subscription that can pay or fail to earn earnings. Incidentally, I learned that it is crucial to keenly analyze the long-term plan of start-ups before investing in the company.

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References Borgenicht, N. (2020). Can WeWork survive its botched IPO? Sage Business Cases, https://dx.doi.org/10.4135/9781529729467.

Saxena, A. (2019, September 26). WeWork, And The Problem With High Valuations in Tech.

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