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.

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.