The Woman Who Warned of WeWork’s Downfall Tells Her Story

(Bloomberg Businessweek) -- Adam Neumann is used to dealing with conflict. Last year, when WeWork Cos. botched its initial public offering, he was forced to resign as chief executive officer of the company he founded. He’s also locked in a legal battle with the coworking startup’s biggest backer, Masayoshi Son.

Back in 2016, things were a bit different. Criticism of WeWork was rare. When Joanna Strange, a former employee, found and shared with Bloomberg internal documents that showed WeWork was falling far short of its financial goals, WeWork sued her. She now says the ordeal—which included questioning from the FBI—nearly broke her.

Strange’s story shows the lengths to which WeWork went to stop the spread of damaging information, years before the company felt the full force of bad news. She details her experience for the first time here and in an upcoming episode of Bloomberg Technology’s new podcast, Foundering. WeWork declined to comment.

The documents and recordings she shares provide an internal view of the embattled company before its cash-flow struggles and runaway expenses became tabloid fodder. In particular, her audio files of Neumann speaking at all-hands meetings in 2015 and 2016 give a glimpse of the man behind WeWork’s rapid rise. Listened to now, his words portend its spectacular crash. He warns new employees that they might not get credit for their ideas. He says WeWork pays staff less than they could get elsewhere because he wants to make sure people are in jobs “for the right reasons.” (WeWork did, however, give employees stock options.) He tells them WeWork is nice to them for the first 30 days, and just “OK” for the next 30. “By day 61, you’ll know our truth,” he says.

Strange was sort of adopted into WeWork. The 42-year-old mother of one worked in human resources at New York-based building-design-software firm Case Inc. In 2015, WeWork acquired Case, and Strange and her colleagues became WeWork employees. She still remembers the unsettling feeling she had when she attended her first all-hands meeting—evening gatherings called Thank God It’s Monday. After an address by Neumann, attendees would hit a gong and chant “WeWork, WeWork,” she says.

Once she started her new job, Strange says she was given a high-level computer password—the login credentials of a manager a few levels above her. She was told she could use it to finish tasks that needed authorization from higher up, but which she’d been asked to do. It worked across multiple platforms, including the company’s email and human resources systems. A few months in, Strange says she tried to sign into her email, expecting to see her own messages. Instead, the other manager’s inbox popped up. There she spotted an email saying the company was planning to cut 7% of staff. Hers was to be one of the positions eliminated. She didn’t mention this to anyone, but she says shortly afterward, colleagues started disappearing without any announcement. She asked her line manager whether there was going to be any discussion of the job cuts internally and was told no.

Strange felt the company’s silence and cavalier attitude were unacceptable. “We should tell people the truth because we say we’re a different kind of company,” she says. “In our mission, we talked about authenticity, right? Are we going to be authentic?” She concluded the company wasn’t going to be honest. “And that’s when, frankly, I just went digging.”

She used the manager’s password to search for internal WeWork files. She found, among other things, a presentation that showed WeWork had to cut its 2016 profit forecast by almost 80% and its revenue estimate by 14%. There were long delays opening buildings, which were denting sales. Strange was infuriated that WeWork was hurting financially but hadn’t told employees anything. She reached out to a reporter—me—because she felt the information should be public.

Bloomberg published two stories: one about WeWork planning staff cuts and another, a few weeks later, about the profit forecast cut. The day the second story appeared, July 15, 2016, WeWork launched legal action against Strange, saying she’d stolen company documents. As evidence, it cited internal systems that tracked her IP address and the files she had downloaded. “Being sued was terrifying,” she says. “I cried a lot. I didn’t sleep well.”

After the lawsuit, Strange, who was laid off in June 2016, struggled to find another job. Any internet search turned up multiple news stories about her. She says two FBI agents came to her home and questioned her for hours, although she never heard of any conclusion to the probe. She worried that WeWork had the resources to prolong a lawsuit that could bankrupt her. On the advice of a lawyer friend, she didn’t show up to court. WeWork was awarded a default judgment against her, which came to a little more than $3,000.

WeWork never collected the money. She’s relieved the saga is over but remains nonplussed by its ending. “I remember looking at my husband and going, ‘That has got to be the most anticlimactic thing that’s ever happened in my life,’ when it started out as something that seemed like it was going to destroy” me.

In the history of WeWork, Strange occupies a puzzling spot: She was the first insider to speak out publicly about the company’s shaky finances, years before it was pilloried for losing billions of dollars annually and racking up billions more in long-term lease obligations. The stories that resulted from her disclosures were among the first to highlight WeWork was making far less money than it had predicted. But the articles, in mid-2016, didn’t halt WeWork’s upward trajectory. Far from it. WeWork kept on going, raising bucketloads of fresh cash. In the meantime, Strange became a pariah among her former colleagues.

Four years on, with Neumann gone and WeWork teetering, her recordings are imbued with a haunting quality. In them, you hear Neumann warn of the exact things that would contribute to his company’s failed share sale. “The only thing that can ruin this is if we don’t get serious about controlling our bottom line, controlling our expenses, getting very focused and getting very clear,” he says in one all-hands meeting. He warns employees that WeWork has a “spending culture” and that it needs to rein in expenses or face problems. “The universe does not allow waste,” he says.

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