Contemporary Issue Analysis

IPO Failure to Launch Case Study

Report Courtesy of Clarity Consulting

Branch North Americas
123 East 3rd Street, Manhattan NY
enquire@clarityconsulting.com
Contents

Contents ............................................................................................................................................... 2
Clarity Consulting ................................................................................................................................. 3
Introduction ......................................................................................................................................... 4
We Company (Parent Company of WeWork) .......................................................................... 4
WeWork Corporate Governance Case Study ............................................................................. 5
Key Corporate Governance Issues ........................................................................................... 7
The Solution .................................................................................................................................... 7
Media Scanning .................................................................................................................................. 8
Earned Media................................................................................................................................... 9
Earned Media Clippings - 1 January 2019 – 13 August 2019 (Prior to IPO Filing) ......... 9
Earned Media Clippings - 14 August 2019 – 1 November 2019 (Post IPO Filing) ........ 12
Social Media .................................................................................................................................. 14
Issue Analysis ................................................................................................................................... 16
Issue Impact Stakeholder Analysis ......................................................................................... 16
Strategic Recommendations......................................................................................................... 17
Appendices ........................................................................................................................................ 23
References ......................................................................................................................................... 31

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 Clarity Consulting

Clarity Consulting is independent global business advisory firm dedicated to helping

organizations manage change, mitigate risk and resolve reputational disputes. Our practises

are staffed with experts specialising in each of these fields; recognised for their proven track

record making positive impacts. Collectively, Clarity offers a comprehensive suite of services

designed to assist our clients across the business value cycle – from Investor relations

programs to proactive risk management and the ability to respond quickly and effectively to

unexpected events and changing environments.

See Appendix 7 to meet our team.

Our Values
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for results
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provide a service that creates impact and change to
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fortunate enough to work with some outstanding
prominent industry bodies to deliver them desired results.

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Introduction

We Company (Parent Company of WeWork)

Founded in New York in 2010, the shared workplace provider quickly became a growing success as
co-working became the new normal across the globe (Huang 2019). The organisation having many
acquisitions in short years expanded at break neck speed to 528 locations, in 29 countries, to provide
communal office space locations for start-ups and small businesses alike (Splento 2019).

WeWork now rebranded as The We Company (WE) filed confidently for an IPO in August, 2019 with
its initial S-1; reporting to go public in September 2019 (Trainer 2019). The company was valued at $47
billion and therefore heavily publicised as the second largest IPO of 2019.

In the filing, the company reported revenues of $1.54 billion and a net loss of more than $900 million
for the first six months of 2019 (Pound and Palmer 2019). During the tubulating IPO process the
company’s valuation dropped down to an expected $10-$15 billion.

Increased scrutiny of the demonstration to operate within bounds of measures of financial soundness,
senior management skills and capability, investments and strategic plan for future operations created a
negative sentiment amongst investors and employees sparking the downturn of the company’s social
operating license.

Adam Neumann, the company’s co-founder and chief executive officer stepped down from his position
and was voted to be removed from the board of executives, following the revoked filing for an IPO.

Two new CEOs, Artie Minson and Sebastian Gunningham been working quickly and aggressively to
cut costs; as the company looks to restore investor confidence for a second IPO. Cost reduction
strategies include downsizing of investments, assets, acquisitions and redundancies (Klebnikov 2019).

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WeWork Corporate Governance Case Study

The accelerated rise and fall of the We Company (WE)’s initial public offering (IPO) serves as an
example to the importance of best practise investor relations programs; and how seriously investors
are observing Environmental Social & Governance (ESG) (Pisani 2019). ‘Unicorns’ is the new
terminology for start-ups that are valued at one billion dollars or more (Fan 2016). Investors enable
these companies a monopoly by providing capital with the promise of profits based on non-
transparent and sometimes untraditional business models (Marx 2019). Employees have been said to
invest their time more heavily into start-ups, than established firms for pecuniary motives (Sauermann
2017). WeWork’s rapid increase of valuation left analysts perplexed and when push came to shove
investors became critical of their sustainable corporate governance (Tiku 2015).

It is not uncommon for ‘tech start ups’ to operate on a top-down managerial structure and downward
communication model with the concept of ‘the founder knows best’ (Florian 2019). For the majority of
unicorn tech companies, they adopt a problematic dual-class share structure, which allows founders
to remain in control without owning a majority of the company. At Facebook, even though 68 percent
of ordinary shareholders voted to replace Mark Zuckerberg as chairman of Facebook, he remains in

the top position (Marx 2019).

For the case of WeWork, Neumann has been portrayed as a change maker and innovative, yet also
seen as an executive that has little self-awareness, is distracted (See Appendix 1), prejudice and
unprofessional. Neumann’s great control of the company (See Appendix 2 and 3) posed as an
organisational risk in the initial IPO (See Appendix 4). Investors were mostly concerned about the
corporate spending habits being reflective of Neumann’s interest and the lack of pathway to profitability
after raising high risk debts.

Intense media interest arose with the focus on WeWork’s Corporate Governance issues such as the
sole male board of directors, insider dealings and a lack of sensible growth strategy. With no clear

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investor relations program in place, the media attention served as decision criteria to scare away
potential and existing investors.

Investor Relations Officers (IRO’s) play an essential strategic role in managing corporate
communications with important stakeholders and helping their companies achieve appropriate
valuation. IRO’s are seen as the corporate advisory gatekeepers; controlling the relationship and access
of information between investors and senior management (Brown, et al. 2019).

Successful Investor Relations Program seeks to demonstrate three fundamental points to its
stakeholders.

1. The company is earning adequate profits and is operating within the bounds of various and
other prudent measures of financial soundness

2. The company has skilled management

3. The company has soundly planned for its future operations

(Curtin University 2019)

Corporate Governance is a driver of investor confidence. Corporate governance involves a set of

relationships between a company’s management, board and stakeholders. Governance provides the
structure in which objectives are set, and the means of attaining them are monitored and performance
determined (Chalhoub 2009). Another one of the Risk factors (refer to Appendix 4) from WeWork’s IPO
filing, is their inability to manage their rapid growth; whilst still naming multiple locations to be opened
in the future plan.

Research in organizational behaviour considers culture as the ultimate driver of performance, as it

defines the values and beliefs that the organization embraces in daily operations as well as its long term
direction (Chalhoub 2009). Culture is enhanced with good corporate governance which enables
employees to make sense of their stability and purpose. Ineffective inexperienced leadership are
common traits of these kinds of start-up companies. Referencing Appendix 5 and 6; there are themes
of employee dissatisfaction with the WeWork corporate governance in regards to adequate resources
to growth ratio (to ensure work life balance) and capability and transparency of management.

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Key Corporate Governance Issues

Investors Strategy Affairs Employees

 Negative investor and public sentiment due to volatile and viral nature of media coverage in
regards to quality of senior management
 Lack of successful investor relations program and dedicated Investor Relations Practitioner.
 Absence of dedicated strategic business consultant and corporate advisory team for public
offering process.
 Lack of dedicated reputational management plan and change management plan for business
variability

The Solution
Clarity Communications will analyse the issue, with context of environmental scanning research. The
research and analysis will form the criteria to propose recommendations for The We Company (WE)
to improve Investor and Public sentiment towards the organisation’s governance restructure for the
preparation of a second IPO.

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Media Scanning

The following analysis was conducted due to the high media coverage of WeWork and parent company
in 2019; and the influence the coverage and subsequent negative sentiment posed on the development
of WeWork’s corporate issue. Media Prior to and Post IPO Filing were analysed for sentiment pattern.

Owned Media Clippings

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Earned Media

Earned Media Clippings - 1 January 2019 – 13 August 2019

(Prior to IPO Filing)
Topic: Investors and IPO

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Topic: Adam Neumann / Company

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Topic: WeWork Employees

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Earned Media Clippings - 14 August 2019 – 1 November 2019
(Post IPO Filing)
Topic: Investors and IPO

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Topic: Adam Neumann / Company

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Topic: WeWork Employees

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Social Media

During the height of communication surrounding the IPO filing and subsequent stepdown of Adam
Neumann as CEO; WeWork’s Twitter, Facebook and Linked in channels fail to acknowledge the
organisational changes occurring.

Assuming the crisis response strategy has been taken to release a holding statement and continue
posting positive content and fail to respond to any negative comments; the organisation is seen as not
wishing to fuel the fire of conversation. Negative comments continue to appear on their posts, and
WeWork is not responding or releasing any more information to mitigate the negative sentiment.

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Issue Analysis

The issue is currently in the Codification stage of the

issue lifecycle as key stakeholders are engaged so the
organisation can establish their position and influence
opinion before the issue is defined/codified by public
domain (Cornelissen 2011).

The We Company (WE) has already demonstrated a

development to issue response by adopting early
tactics of a bridging strategy. The company is open to
change and responding to changes. Continuing to
follow this strategies course would mean the focus for
We in the future is relationship building and
maintenance as the function of public relations (Soojin 2017).

Issue Impact Stakeholder Analysis

Problematic (Latents): -5

Supporters of Adam Neumann Oppose

Position on
Antaganostic (Key Players): Problematic Antagonistic
Adam Neumann, Wife and Sister
employed by WeWork, Employees of
WeWork, Government, Financial and
Economic Institutions 0

Issue

Supporter (Defenders): Support

Investors and Shareholders, +5 Low Priority Supporter

Commercial Realestate and Property
managers

Low Priority (Marginal):

General Publics, Competitors 0 – Least Most – 10
Importance

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Strategic Recommendations

Clarity recognises the need for WeWork to invest in their corporate governance structure and
subsequent stakeholder communications for the next 12 month period. keeping publics and key
stakeholders informed of changes and efforts will Improve the company’s image of transparency for
senior management and help to build trusts and positive sentiment for WeWork; enabling them to
work towards another successful IPO in the future. We recommend the investment in people; to help
form a new corporate governance structure, and in turn effectively communicate changes:

Investor Relations Program

Referencing the risk factors outlined in Appendix 4, a great need can be seen for WeWork to invest in
an Investor Relations Program to apply corporate listening and strategic counsel on the concerns of
stakeholders. Recognising the importance of a listening tactic and communications plan is valuable to
private sectors as the relationship they build with their investors is pivotal to the company’s success. It
is both important for IRO’s to engage in communications to portray the company in a favourable light
(Brown, et al. 2019), but also invest time to close value gaps to build trusts for the organisations
senior management to deliver what it is they have promised and communicate a ‘get well plan’ when
things go badly (Laskin 2011).

An Investor relations program requires a full time Investor relations officer, who will work closely with
senior management. The scope of this role will be:

 Strategic Counsel: Provide communications counsel on an ongoing basis, with senior account
professionals on call to advise management on a variety of issues
 Corporate Messaging: Identify gaps in company messaging and establish a common
messaging framework that can be used with investor and non-investor audiences alike
 Earnings Support: Provide earnings debrief and logistics surrounding the earnings
announcement process
 Collateral Development: Prepare investor relations newsletter, press releases, investor
presentations, investor videos and reports (FTI Consulting 2019).

We recognise that the The We Company is still private sector, meaning they have no obligation to
disclose financial information to their investors, shareholders and the public. Given the current
situation from the release of the IPO; we still recommend the IRO to create earnings and capital
spending content that will promote transparency and increase investor shareholder trusts.

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Employ Change Management Consultant

In order to improve the sentiment of relationships with the organisation and senior management we
recommend to employ a Change management Consultant for a period of 12 months. The scope of
this role will be to implement internal and external change management plans for:

 Stakeholder Analysis: Analyse the current power and interest of stakeholders to effectivity
communicate with them over a 12 month calendar period.
Internal Programs: Conduct an analysis of employee awareness, sentiment towards
direction, brand, strategy, awards, job security etc. Creating networks for leadership support
and SME mentoring.
Develop internal programs that improve employee alignment with the company’s goals,
strategies and the drivers of reputation.
 Change Impact Assessment: Conduct an assessment to monitor the success of adaption to
change in regards to new governance, acquisitions and deployment of projects.
 Change Collaboration and Support: collaborate with key stakeholders to support
organisational change and ensure goals and objects are correctly met.

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Employ Dedicated Communications and Media Relations Spokesperson
Due to the negative existing sentiment in the media of both WeWork and their corporate governance
we propose to employ a dedicated communications and media spokesperson for a 12 month period
who will work closely with both senior management, executives and the existing communications
team on corporate affairs and public policy. The scope of this role will be to both monitor and improve
the issue in the media, and help management teams translate vision and strategy into a tangible
corporate message to convey the company’s mission and plan in a way that inspires stakeholder
support.

 Media Relations: Improve media relations and awareness for new governance structure and
leadership. Assist senior employees to be recognises as experts in their field and engage in
media relations to create positive content for the organisation. Work closely with IRO to
provide response to media inquiries such as investors, shares and financial inquiries.
 Social Media Monitoring and Content Creation: Monitor the issue on social media and
work closely with the communications team to ensure scheduled content will not fuel the
issue. Respond to concerns on social media and remove any spam content. Create content
that will both address and combat the issue.
 Internal Programs: Spokesperson and executive coaching for media relations. Implement
strategy and messaging workshops for employees to raise awareness of the issue and aid
them to understand how organic content can advocate for the organisation and help them to
build networks.

The current environment calls for WeWork to provide more visibility of the company’s governance
restructure and plans for improvement. This role will provide counsel and support to translate future
plans to public information. See next page for an example of a media release, and Social Media Post.

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 The WE Company
Chelsea, Manhattan NY
Phone: +81 3 6889 2300
press@wework.com
MEDIA RELEASE
3 November, 2019

IMMEDIATE RELEASE

WeWork Announces Board and Governance

Changes for 2020
After receiving $1.5 billion in funding The We Company announces
restructure initiatives effective from 2020
NEW YORK —The We Company (“WeWork” or the “Company”) has received $1.5billion in funding
from SoftBank Group Corp. (“Softbank”) In connection with the completion of the funding, several
governance changes became effective today, including the reconstitution of the WeWork Board of
Directors.

“The $1.5 billion in funding that WeWork received today from SoftBank positions the Company for the
future and underlines Softbank’s steadfast belief in the business,” said Marcelo Claure, Executive
Chairman of the Board of Directors of WeWork.

WeWork seeks to increase the diversity of their board and employ additional strategic
communications personnel to assit the organisations employees and stakeholders to navigate change
and achieve their objectives during periods of transformation.

Claure explained “At WeWork we know the most challenging aspect of change is our people.
Focusing our investment efforts to our people, our members and our shareholders is going to be the
best use of our capital to ensure our organisation can continue to meet its goals, and assist our
members to operate day to day in world leading co-working spaces”.

WeWork intends to deploy a governance task force to respond to the concerns in light of the initial
public offering in August 2019. The company advises that a corporate governance report will be
issued to its shareholders and available at request to investors to assist the notion of providing more
transparency for those concerned.

“It is the right time for start-up organisations like WeWork to run a thorough health check over their
governance and conduct governance arrangements which should really start with the Board reflecting
on what good conduct really means for their organisation when it comes to purpose, strategy, and
risk,” said Claure.

Environmental Social & Governance (ESG) factors are areas that investors are observing in regards
to both public and private organisations to form the basis of their investment decisions. These will be
some factors that will be reported on in regards to efforts and expenditure in the corporate
governance report.

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About WeWork

WeWork provides members around the world with space, community, and services through both
physical and virtual offerings. Its mission is to create a world where people work to make a life, not
just a living. As of Q2 2019, WeWork had 528 locations in over 111 cities and 29 countries. Our
527,000 memberships represent global enterprises across multiple industries, including 38% of the
Global Fortune 500. We are committed to providing our members around the world with a better day
at work for less.

ENDS
For media inquiries please contact:
Gwen Rocco / Erin Clark
press@wework.com

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SOCIAL MEDIA POST

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Appendices

Appendix 1
CBI Insights Research Report

Appendix 2
The We Company S-1 IPO Filing

Because Adam will control a majority of our outstanding voting power, we will be a “controlled company” under the
corporate governance rules for -listed companies. Therefore, we may elect not to comply with certain
corporate governance standards, such as the requirement that our board of directors have a compensation
committee and nominating and corporate governance committee composed entirely of independent directors.

Appendix 3
The We Company S-1 IPO Filing

Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and
innovator, while thriving as a community and culture creator. Given his deep involvement in all aspects of the
growth of our company, Adam’s personal dealings have evolved across a number of direct and indirect
transactions and relationships with the Company. As we make the transition to a public company, we aim to
provide clarity and transparency on the history of these relationships and transactions, as well as the background
to the strategic governance decisions that have been made by Adam and the Company.

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Appendix 4
The We Company S-1 IPO Filing

Appendix 5
Glassdoor WeWork workplace review

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Appendix 6
Glassdoor WeWork workplace review

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Appendix 7
PR consultancy ‘Meet Our Team’ Example

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Weekly Activities
Week One

Week Two

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Week Three

Week Four

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Week Six

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Week Nine

Week 10

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