Adam Neumann and other investors, including Dan Loeb's Third Point firm, are considering a bid to buy WeWork out of bankruptcy. The co-founder of WeWork and his real estate company, Flow, have been trying to obtain the necessary information from the company to formulate an offer since December, according to a letter sent to the company's lawyers to which DealBook and Bloomberg have had access. More recently, they have worked to put together a financing package to bring the office space rental company out of receivership.
The offer would be for the entire company or its assets, according to the letter, which does not include details about the amount Neumann, WeWork's co-founder, would be willing to offer for the company. Third Point has only had preliminary talks with Neumann and his new company.
In the letter, a lawyer for Neumann notes that efforts to submit a bid have so far been hampered by a dearth of information from WeWork. “We write to express our dismay at WeWork's lack of commitment to even provide information to my clients in what is intended to be a transaction that maximizes value for all stakeholders,” wrote Alex Spiro, a Quinn Emanuel attorney representing Neumann. , according to the letter, in which Neumann complains about being ignored by the company.
“Even before the bankruptcy filing, WeWork canceled a scheduled meeting hosted by Mr. Neumann regarding a significant capital injection that would have helped the company. Concerned about the state of the business and the company's prospects, Mr. Neumann had previously worked to raise up to $1 billion in financing to stabilize WeWork by October 2022, when just before the meeting (while participants were literally in the air traveling), the former slim advisor closed that process without explanation,” adds the lawyer's letter.
“My clients are willing to submit a detailed proposal to purchase the company or its assets that has the flexibility to allow other interested parties to participate,” the text indicates. “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 that debtors would achieve.” independently,” he concludes.
Neumann brought in SoftBank, which injected 10 billion into WeWork's capital with a multimillion-dollar valuation. For the Japanese investment group it has probably been their most ruinous investment and now selling the bankrupt company to the person who embarked them on that failed adventure would be somewhat humiliating. Perhaps that is why the company does not want to know anything about Neumann and limits itself to saying that it receives various offers and expressions of interest in his assets. WeWork, technically bankrupt, is actually now in the hands of its creditors. Any agreement to purchase it requires your approval.
Rise and fall
WeWork was founded in 2010 by the Israeli Neumann and the American Miguel McKelvey, who opened their first office space in New York's SoHo in April 2011. From there it began to grow, opening shared office spaces, first in the United States and then around the world, without worrying about the multimillion-dollar losses it suffered. It raised funds in different financing rounds that increased the value of the company, turning the real estate business into a technology company.
The company reached its maximum valuation in January 2019, at $47 billion, and was preparing to go public, but it did not pass market scrutiny. Neither its accounts, nor its business model, nor its future prospects supported the valuation it had been achieving. Added to this was Neumann's unorthodox management style, a lover of excess, who installed a swimming pool and a sauna in his office and whose parties were legendary. In addition, he had operations linked to the company in which he benefited by renting real estate that he bought from the company.
The IPO was cancelled. Softbank then decided to rescue the company and fire Neumann, who received multimillion-dollar compensation. The pandemic and confinement completely changed work patterns. With the spread of teleworking, many offices were no longer occupied after the health crisis passed. WeWork had losses of $3,129 million in 2020; of 4,439 million in 2021 and 2,034 million in 2022, according to their annual reports. Those 9.6 billion dollars in three years (about 9.1 billion at the current exchange rate) exceed what the company has earned in those same years.
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