The We Co. Chief Executive Officer Adam Neumann will step down from the top post in response to the recent criticism around his leadership, the company said today.

“While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction, and I have decided that it is in the best interest of the company to step down as chief executive,” Neumann said in a statement attached to the announcement.

The development isn’t unexpected. Over the weekend, a leak revealed that WeWork’s board was convening to discuss proposals for removing Neumann. Much of the pressure to oust the founder is said to have come from SoftGroup Group Corp., WeWork’s largest investor, which has bet nearly $13 billion on the co-working company over the years.

Neumann’s resignation is the culmination of weeks of criticism that started when WeWork released the paperwork for its planned stock market listing. The filing revealed massive losses and a convoluted governance structure that granted the former CEO outsize influence over the company.

Under the original IPO terms, Neumann’s shares would have given him majority control by carrying 20 times the voting power of the ordinary shares that were to be offered to investors. The company halved the special stock’s voting power earlier this month and made a number of other governance changes in a bid to assuage Wall Street’s concerns. However, that was evidently too little, too late.

Neumann will continue with WeWork as the nonexecutive chairman of the board. A source told CNBC that the voting power of the founder’s shares will be reduced by two-thirds more as part of the shakeup, which will have the effect of removing his majority control. 

Neumann is being replaced by WeWork Vice Chairman Sebastian Gunningham and Chief Financial Officer Artie Minson, who will work as co-CEOs. Gunningham previously served in the role of senior vice president at Amazon.com Inc. and earlier at Oracle Corp., while Minson was the CFO of Time Warner Cable until 2015.

WeWork’s planned initial public offering is reportedly in question following the leadership shakeup. CNBC’s sources said that an IPO is unlikely to take place this year even though the company had reaffirmed it would hit the stock market in 2019 as recently as last week.

Tipsters previously revealed that WeWork plans to slash its target valuation for the listing from $47 billion to as little as $10 billion. The scrutiny over Neumann’s leadership was only one contributor to the decision, and not the biggest one at that.

The main issue that gave investors pause is WeWork’s uncertain path to profitability: The co-working provider logged a massive $904 million net loss in the first half of 2019 on revenues of $1.5 billion.

WeWork’s new leadership may have to make drastic changes to regain investor confidence. The Information reported this morning that executives are considering to spin off the company’s secondary businesses and lay off 5,000 workers, about a third of its workforce. 

Photo: WeWork