Layoffs at troubled startup WeWork have begun, sending employees home for a three-months garden leave and an extra month’s pay.
The first round of layoffs on Monday impacted 25 percent of the labor force at Meetup, a social events app WeWork acquired, which amounted to roughly 50 employees, says a source.
WeWork, which has put Meetup for sale, also laid off dozens more on Thursday at the Flatiron School, a coding bootcamp also owned by the shared-space startup.
WeWork’s new executive chairman Marcelo Claure speaks to an audience of WeWork employees about impending layoffs in October. The first round of layoffs on Monday impacted 25 percent of the labor force at Meetup, a social events app WeWork acquired
WeWork laid off dozens more on Thursday at the Flatiron School, a coding bootcamp also owned by the company. Workers complained they were getting a raw deal, considering the company’s founder and former CEO Adam Neumann (pictured) received a $1.7 billion to leave
A severance offer that includes three-months gardening leave and four more weeks of pay may not apply to all employees, reports Recode.
As larger cuts of up to 4000 employees are expected, some of those already let go have complained they were getting a raw deal, considering the company’s founder and former CEO Adam Neumann received a $1.7 billion compensation package to leave,
‘WeWork is happy to cash out Adam’s equity and give him a big check, but employees like me that need that cash aren’t getting any value for our equity,’ said a former Meetup employee who spoke on the condition of anonymity, Recode reports.
Meanwhile, in an attempt to boost morale, the company’s new executive chairman compared continuing to work with the company to running in New York City’s annual 26-mile marathon, which he personally ran on Sunday.
Meanwhile, in an attempt to boost morale, the company’s new executive chairman Marcelo Claure compared continuing to work with the company to running in New York City’s annual 26-mile marathon, which he personally just ran on Sunday.
‘Over 26 miles, I got an incredibly humbling sense of the sheer scale of humanity we serve every single day’, Marcelo Claure wrote in a memo to employees. He is pictured in a social media post after completing the marathon
‘Over 26 miles, I got an incredibly humbling sense of the sheer scale of humanity we serve every single day’, Marcelo Claure wrote in a memo to employees that was leaked to the Sovereign Wealth Fund Institute.
Claure also has been charged with meeting with employees to discuss the planned layoffs. He said anyone who was being asked to leave, would do so with ‘dignity’.
‘But it’s something that whoever is laid off, they’re going to know that they’re taking one for the team to make sure this company thrives in the future’, he said in a leaked transcript from an October 23 meeting.
Claure, a SoftBank executive had taken the reins at WeWork that week as part of the Japanese investment firm’s bailout of the startup. SoftBank, installed Claure as chairman, replacing Neumann, and committed an additional $9.5 billion to the roughly $10 billion SoftBank has already sunk into the startup.
Just under a third of WeWork’s global workforce is being laid off, and about 1,000 of the cuts will hit employees such as janitorial staff, says a source cited by the Financial Times.
Although Neumann resigned as CEO in September following the implosion of the company’s planned IPO, he remained chairman and controlled the company’s board through special voting rights.
As part of the SoftBank bailout, Neumann agreed to relinquish control in exchange for a lucrative deal valued at $1.7 billion.
The deal includes giving Neumann the right to sell his stake in the company for as much as $970 million as part of a tender offer, in which SoftBank will buy up to $3 billion in WeWork shares from investors and employees. He currently owns a little over one fifth of WeWork.
SoftBank has also agreed to extend him a $500 million loan to repay a credit line from JPMorgan Chase & Co, as well as pay him a $185 million fee for a four-year assignment as a consultant to WeWork, sources said.
At one staff meeting, an infuriated employee grilled Claure on the deal, saying: ‘We’ve seen in the news, Adam’s getting paid a billion dollars, right’?
‘I’ve been here since April 2017 and basically every quarter we’ve heard, ‘Trust me, trust me, trust me, trust me, trust me”, the employee went on. ‘What is it that’s going to change? We need to see change’.
Claure insisted that Nuemann’s package had been exaggerated by the press.
WeWork’s new executive chairman Marcelo Claure is pictured meeting with employees about impending layoffs. He said anyone who was being asked to leave, would do so with ‘dignity’
‘As a shareholder, he has the ability to sell his shares. He founded the company, he has a tremendous amount of shares. So nobody’s paying Adam a billion dollars or $1.7 billion’, Claure said.
‘Two, Adam for whatever reason, borrowed money from JPMorgan’, Claure continued. ‘So we made the decision to lend Adam a certain amount of money for him to pay his loan. But in exchange as he sells those shares, he needs to pay us right back.’
‘And then thirdly is we’re paying him a consulting fee’, Claure said, explaining that the fee was in exchange for Neumann relinquishing his special voting rights, as well as for actual advice Nuemann may give Claure in the future.
Notably, Claure stressed that Neumann would have no role in running the company in the future.
‘I do plan to use him, but he’ll be Adam with me, and me with you. So Adam is not going to have any role in the company, he’s not going to be in the board of directors, but I do plan to use some of his knowledge’, Claure said.
SoftBank’s takeover deal valued the company at just $8 billion, a huge decline from the $47 billion valuation in WeWork’s last funding round in January.
Marcelo Claure, a former SoftBank executive, took the reins at WeWork as part of the Japanese investment firm’s bailout of the startup. Claure is pictured above with SoftBank CEO Masayoshi Son
As part of the deal, SoftBank offered to purchase shares from existing investors and employees at $19.19 per share.
That is reportedly less than the exercise price of any employee stock options issued since January 2016, making any options issued since then worthless under the current valuation.
Neumann’s case is different, in that he owns his shares outright and can sell them at a profit even under the lower valuation.
A spokesperson for WeWork declined to comment on the layoffs, reports Recode.
Severance contracts reviewed by the news outlet require that employees not sue WeWork and agree to non-compete clauses, which added to the disappointment expressed by the former workers.
‘In terms of the non-compete, what does that even mean? So we can’t work at a school, a co-living facility, a gym, a tech company? There are so many things’, says a former Meetup employee.
Besides WeWork’s core business of renting share-office space (pictured), the company has extended itself into other businesses, including ‘WeGrow’, a children’s school that the company now plans to shutter. WeWork also sunk $13 million in a wave pool
Besides WeWork’s core business of renting share-office space, the company has extended itself into other businesses, including ‘WeGrow’, a children’s school that the company now plans to shutter. WeWork also sunk $13 million in a wave pool, and reportedly has plans to launch an electronic games division.
The ex-worker claimed human resources repeatedly told laid-off workers that severance offers were, ‘generous’.
‘It’s kind of insulting they’re describing this as generous’, said the ex-worker about the layoff terms, reports Recode.
Laid off workers were warned against discussing severance terms and told that they would be monitored by the company and could face ‘aggressive action’ for talking.
A November 19 deadline was set for accepting the severance deals. Employees also have the option of leaving without compensation.
Many employees had joined WeWork when the company was valued at $47 billion, and was planning an initial public offering that was one of the biggest this year. The workers also were early investors who planned to cash out their equity in the company.
‘The thing with WeWork is the fact that the CEO ran essentially a scam and is walking away very wealthy’, Rebecca Givan, a professor of management and labor relations at Rutgers Univerty told Recode. ‘And all these workers are getting screwed’.
Rebecca Givan, a professor of management and labor relations at Rutgers University was critical o WeWork founder Andrew Neumann (pictured), saying ‘The thing with WeWork is the fact that the CEO ran essentially a scam and is walking away very wealthy’