In the tumultuous aftermath of WeWork’s spectacular fall from grace, co-founder Adam Neumann seeks a surprising return, offering a $200 million lifeline to the beleaguered company. The bold proposal, aimed at fending off bankruptcy, has encountered a chilly reception from current management. Neumann’s legal team expresses frustration over delayed responses, hinting at a potential power shift. As WeWork grapples with stalled lease negotiations and creditor concerns, the enigmatic entrepreneur’s comeback bid, while controversial, presents a compelling twist in the ongoing saga of corporate revival and redemption.
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By Amelia Pollard and Jeremy Hill
Even in the wild tech start-up scene, Adam Neumann stood out as a quirky, self-obsessed maverick with a reckless streak.
Which goes a long way in explaining why the current management at WeWork Inc. — the company Neumann built into a $47 billion real estate powerhouse before he was pushed out and it fell into bankruptcy — isn’t eager to pick up the phone when he calls to do business. Neumann wants to slide WeWork a slug of cash to help it pay leases and legal fees and avoid liquidation — a move that, if accepted, would effectively put him back in control of the company he co-founded.
Some two months have gone by since Neumann first reached out to WeWork and, his lawyers contend, he’s still waiting on the necessary facts and figures to fine-tune and finalize his proposal.
“We write to express our dismay with WeWork’s lack of engagement,” Alex Spiro, an attorney representing Neumann, told WeWork’s lawyers in a letter.
Adam Neumann speaks onstage during WeWork Presents Second Annual Creator Global Finals at Microsoft Theater on January 9, 2019 in Los Angeles, California.
The private letter’s public circulation on Tuesday — Bloomberg was one of several major news organizations to report it — highlights the frustration growing in the Neumann camp. But the truth is they have an increasingly strong hand to play as they seek to get WeWork, and the investors who control it, to the bargaining table.
A prior debt restructuring — a last gasp of sorts in early 2023 — put a handful of big time investors, namely SoftBank Group Corp. and King Street Capital Management, in control of the company’s highest-ranking debt. Those investors struck a tentative deal months ago to take over the company if it is able to renegotiate burdensome office leases.
But that plan has been clouded by doubts: a smattering of the company’s landlords, without whom it has no business at all, are ringing alarms about a lack of progress in the revival effort. So are low-ranking creditors. That means WeWork may not be in a position to refuse anyone looking to inject cash into the business, even if that person is the one who sowed the seeds of its insolvency to begin with.
“Adam Neumann’s grandstanding couldn’t come at a worse time for WeWork,” Daniel Gielchinsky, founding partner of DGIM Law, said in an interview. “And if you just think about history repeating itself, Adam Neumann was ousted from this company for a reason. Putting him back at the helm of this company would almost certainly spell its demise in the long-run.”
Spiro, Neumann’s lawyer, didn’t immediately respond to a request for comment, nor did representatives for SoftBank and the creditor group that includes King Street. A spokesperson for King Street declined to comment.
‘Painfully Little Progress’
WeWork has been in bankruptcy since early November with plans to re-negotiate hundreds of leases, many of which it says are simply too expensive. But that process has been less fruitful than expected, and a move to withhold rent from landlords who won’t play ball has run into serious opposition.
US Bankruptcy Judge John K. Sherwood of New Jersey set a hearing for later this month to decide whether he’ll force WeWork to pay those landlords. But a panel of the lowest creditors in the pecking order is worried the company just doesn’t have the money to pay its bills, which would put the whole restructuring effort in jeopardy.
“We don’t want to see a truly, administratively insolvent estate,” said Kris Hansen, an attorney representing WeWork’s official committee of unsecured creditors, speaking in bankruptcy court Monday. In bankruptcy lingo, that refers to companies becoming so cash-poor that they can’t pay their lawyers and bankers in full, let alone junior creditors.
“There has been painfully little progress,” Hansen said.
Enter Neumann. His lawyer said he and his startup have floated a $200 million financing package to help WeWork keep paying for its restructuring, a sum that would help keep the lights on for at least a little while. Such financing typically sits at the very top of the repayment stack and would give Neumann considerable sway in the outcome of the bankruptcy.
In an emailed statement Tuesday, WeWork said it receives expressions of interest from outside parties on a regular basis, which its advisers review “with a view to acting in the best interests of the company.”
“WeWork is fully confident in our ability to successfully navigate the Chapter 11 process and emerge a financially strong and sustainable company,” a spokesperson for the company said.
A Steve Jobs-like return to his creation would be in line with Neumann’s brash personality. When he was running WeWork, he loved being the face of the company, often giving pump-up speeches at its Summer Camp festivals and all-hands gatherings. During his tenure as CEO, many of the company’s business choices — like running an elementary school and investing in an indoor wavepool company — reflected his personal interests.
Neumann has also stayed devoted to some of the core ideas behind WeWork, even after his messy exit from the company in 2019. His new venture, Flow, is trying to create residential buildings that give its tenants a sense of community with each other, just as WeWork pitched “community” to its office subletters.
Uncertain Price Tag
Neumann has not yet provided even a roundabout dollar figure regarding what he would bid for the company, according to a person with knowledge of the matter. The company is willing to give Neumann the access to information he needs to formulate a bid, the person said.
He may also need support from the company’s highest-ranking creditors. Longtime backer SoftBank Group Corp. and investment firms like King Street, Silver Point and Brigade Capital Management own most of the company’s secured debt, according to court filings.
It’s possible Neumann has the resources to pull off a deal for WeWork, according to the Bloomberg Billionaires Index, which pegs his net worth at $1.7 billion. That estimate doesn’t include his stake in Flow, which raised $350 million from venture capital firm Andreessen Horowitz in August 2022 at a $1 billion valuation. At least some of Flow’s residential properties were owned by Neumann, and his stake in the company isn’t known.
“In a hybrid work world where demand for WeWork’s product should be greater than ever, my clients believe that the synergies and management expertise offered by an acquisition by my clients could significantly exceed the value of the debtors on a stand-alone basis,” Neumann’s lawyer wrote in the letter. “WeWork should at least educate itself about that potential and not preclude itself from maximizing value.”
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