WeWork CEO Adam Neumann announced Tuesday he is stepping down after a uproar over governance and valuation just as the company was planning to go public.
Vice Chairman Sebastian Gunningham, a former Amazon exec, and CFO Artie Minson, formerly of AOL and Time Warner Cable, will take over as co-CEOs, while Neumann will be nonexecutive chairman, the company said. The new CEOs are expected to remain in those roles permanently, the company said.
"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.
Neumann's future at WeWork, which offers coworking rental space around the world, has been in question as the company has been preparing for an initial public offering. The company delayed its IPO after releasing its S-1 filing to skepticism about its corporate governance and valuation. WeWork said in a statement last week that it still plans to go public this year. However, several people familiar with the board's thinking told CNBC that an IPO is now unlikely this year.
Neumann's voting shares will be reduced in power from 10:1 to 3:1, a source confirmed to CNBC, meaning he will no longer have majority voting control. Neumann is the company's largest individual stakeholder with about 115 million shares, and the ownership structure gave him a tremendous amount of control.
SoftBank chairman Masayoshi Son, who has invested billions of dollars in WeWork, led the charge to remove Neumann, CNBC has reported.
The falling out between the two didn't happen overnight. SoftBank has been consistently frustrated with Neumann's tendency to brush off advice, from pushing forward with an IPO to using phrases in WeWork's S-1 such as "elevate the world's consciousness" — a phrase SoftBank urged Neumann to eliminate but to no avail, sources previously told CNBC.
Analysts have been critical of WeWork's $47 billion private valuation and the company considered cutting it in half, The Wall Street Journal reported earlier this month.
According to a report in The Information on Tuesday morning, WeWork execs have met with bankers to discuss cost reduction measures, potentially including layoffs of up to one-third of the company's workers, or about 5,000 employees, as well as closing ancillary businesses such as its private grade school. The Financial Times later reported that WeWork would keep its computer programming school.
In the company's IPO prospectus, WeWork called Neumann "critical to our operations."
"Adam has been key to setting our vision, strategic direction and execution priorities," the S-1 said. "If Adam does not continue to serve as our Chief Executive Officer, it could have a material adverse effect on our business."
-CNBC's Alex Sherman contributed to this report.