Business

Ousted WeWork co-founder Adam Neumann seeking to buy company out of bankruptcy

Entrepreneur says he is partnering with Third Point but hedge fund says it has not committed to participating in any deal

Adam Neumann oversaw WeWork as its valuation peaked at $47 billion (€43.7 billion) in private markets but subsequently crashed. Photograph: Mark Lennihan/AP

Ortenca Aliaj and Eric Platt
Tue Feb 6 2024 - 15:29

Adam Neumann is trying to buy WeWork out of bankruptcy, claiming he has Wall Street backing to take control of the company he was ousted from after racking up billions of dollars of losses.

Lawyers acting for Mr Neumann sent a letter to WeWork on Monday saying he was “partnering” with Daniel Loeb’s hedge fund Third Point and had been trying to engage with the company since December to no avail.

However, Third Point told the Financial Times it had held “only preliminary conversations with Flow [Neumann’s property company] and Adam Neumann about their ideas for WeWork, and has not made a commitment to participate in any transaction”.

[ What does WeWork’s US bankruptcy mean for Dublin’s office market? ]

Executives from Third Point, Japanese conglomerate SoftBank and Mr Neumann last held an official meeting to discuss a potential bid for the company in October, people familiar with the process said.

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SoftBank did not immediately respond to a request for comment.

Mr Neumann oversaw WeWork as its valuation peaked at $47 billion (€43.7 billion) in private markets but subsequently crashed after scrapping an initial public offering. Potential investors had raised concerns about the company’s business as well as how Mr Neumann managed and controlled WeWork.

Any attempted takeover will be fraught with challenges, given Mr Neumann and his potential backers must win the support of WeWork’s senior creditors, who were poised to take control of the company if and when it emerged from bankruptcy.

That would mean winning over a company Mr Neumann has already heavily bruised: SoftBank has sunk more than $16 billion into WeWork and its affiliated businesses.

In his letter, Mr Neumann’s lawyer Alex Spiro said his client had been dismayed by the lack of engagement from WeWork when the co-founder had pressed to join the restructuring process.

“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 debtor’s on a stand-alone basis,” Mr Spiro wrote.

Mr Neumann has held conversations with some of WeWork’s creditors, a group that includes King Street Capital, Brigade Capital and BlackRock, but it has been unclear if any are willing to go along with his plans.

He also faces a ticking clock as WeWork struggles through the bankruptcy process. The company’s lawyers told a bankruptcy judge that WeWork was running out of money, in need of new financing, and that its efforts to restructure leases were progressing slowly.

Mr Neumann’s counsel said that WeWork’s unwillingness to provide it proper information had “jeopardised the ability of the company to ... maximise value for all stakeholders”.

Mr Neumann has been paid out handsomely by SoftBank over the years. The WeWork co-founder clinched a $185 million non-compete agreement in 2019; in 2021 he agreed a $106 million settlement over SoftBank’s attempt to back out of a tender offer. His investment vehicle was ultimately paid $578 million for part of its equity holdings in WeWork.

WeWork said it reviewed all expressions of interest but believed that “the work we are currently doing – addressing our unsustainable rent expenses and restructuring our business – will ensure WeWork is best positioned”.

– Copyright The Financial Times Limited 2024

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