Business

What happens next at WeWork

Posted September 23, 2019 6:30 a.m. EDT

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Some WeWork board members want to remove Adam Neumann as chief executive of the company, the Wall Street Journal reported Sunday, citing people involved in the talks.

It appears that Neumann has lost the confidence of the real estate startup's largest investor. SoftBank CEO Masayoshi Son, who has invested billions in WeWork, supports Neumann's removal, according to CNBC.

Why now? The potential move against Neumann comes after WeWork's parent company was forced to delay a planned IPO because of tepid demand from investors. The company's expected valuation had reportedly fallen to about a third of the $47 billion achieved in its most recent private fundraising round.

WeWork sought to address investor concerns by overhauling its governance. But new questions have emerged about Neumann's personal conduct. The Wall Street Journal reported last week that the CEO had carried marijuana across international borders while traveling to Israel on a private jet.

What happens next: Neumann may prove difficult to sideline. The company has seven board members, including Neumann. SoftBank is also represented on the board.

According to the Journal, the situation is "fluid" and Neumann "still has allies among the directors and the ability to fire the entire board thanks to shares he controls that carry extra votes." The newspaper said the board is expected to meet as soon as this week.

One potential outcome: The board could consider a proposal to remove Neumann as CEO and make him the company's non-executive chairman.

Skeptics abound: Investors were already concerned about what they read in WeWork's prospectus, or S-1, including potential conflicts of interest involving Neumann.

Here's what Dick Costolo, the former CEO of Twitter, told the Wall Street Journal last week about the worries:

"This is not the way everybody behaves," said Costolo. "The degree of self-dealing in the S-1 is so egregious, and it comes at a time when you've got regulators and politicians and folks across the country looking out at Silicon Valley and wondering if there's the appropriate level of self-awareness."

Ouch ...

Thomas Cook goes under

British tour operator Thomas Cook collapsed Sunday night, stranding hundreds of thousands of travelers and putting 21,000 jobs at risk.

The 178-year-old company said in a statement that its board "concluded that it had no choice but to take steps to enter into compulsory liquidation with immediate effect" after talks on a financial rescue failed.

Thomas Cook pioneered package holidays, and its collapse caused a ripple effect across Europe and Asia.

Losers: Shares in China's Fosun Tourism dropped by nearly 5% in Hong Kong. The billionaire founder of parent company Fosun International, which owns all-inclusive holiday firm Club Med, is Thomas Cook's largest shareholder, according to Refinitiv data.

Winners: Rival travel groups and airlines got a boost from Thomas Cook's demise in European trading.

Shares in low-cost airlines Ryanair and EasyJet were up by 2% and 5% respectively. EasyJet is making a big push into the holiday business with the aim of selling accommodation packages to millions of people who fly with the airline but currently book hotels elsewhere.

EasyJet is also working with the UK Civil Aviation Authority to support the huge repatriation effort required to bring stranded Thomas Cook customers back to the United Kingdom.

Germany's TUI, Thomas Cook's biggest rival tour operator, saw its shares gain more than 6% in Frankfurt.

European carmakers speak with one voice on Brexit

The European automotive industry has issued a united warning about the "catastrophic consequences" of Britain leaving the European Union without a deal to protect trade.

Here's Mike Hawes, CEO of the UK Society of Motor Manufacturers and Traders, on the risks of crashing out of the European Union:

"A 'no deal' Brexit would have an immediate and devastating impact on the industry, undermining competitiveness and causing irreversible and severe damage. UK and EU negotiators have a responsibility to work together to agree a deal or risk destroying this vital pillar of our economies."

Business has been calling for urgent clarity on Brexit. But the united call from 23 European automotive associations is new. Together, the industry says it accounts for about 6% of EU employment.

It's not clear whether the worst can be avoided. UK Prime Minister Boris Johnson has pledged to take Britain out of the bloc on October 31, whether or not an exit deal has been agreed. His government's discussions with EU officials have not yet produced a breakthrough, and the clock is ticking. Talks will continue at the United Nations General Assembly in New York Monday.