Adam Neumann has made a preliminary offer to acquire WeWork out of bankruptcy for more than $500 million, five years after being dismissed by the office-sharing business he created. However, it is unclear whether he has the necessary funding and creditor support to close the acquisition.
In order to recapture WeWork, Neumann must deal with the company’s controversial background, funding uncertainties, and the challenge of evaluating a corporation in the middle of a reorganization process. CNBC interviewed several people familiar with the company and Neumann’s offer. They sought anonymity so that they could speak freely about intimate topics.
Rithm Capital, which acquired Daniel Och’s Sculptor Capital Management in November, is among the firms interested in financing the deal, according to CNBC. Rithm’s engagement is still preliminary, and the due diligence process is in its early stages, according to one of the persons.
More broadly, sources familiar with the subject are unconvinced that Neumann has committed cash to back an offer. According to the sources, Neumann had mentioned alternative finance possibilities in prior discussions with WeWork’s advisors that have not materialized.
For example, Dan Loeb’s Third Point was previously mentioned in a letter from Neumann’s counsel to WeWork’s bankruptcy advisors as a firm that provided money. But the hedge firm promptly denied involvement and insisted negotiations had only been exploratory. People familiar with the situation informed CNBC that Third Point is not involved in any offers.
Baupost Group was also mentioned as a prospective finance source months ago, but did not participate in Neumann’s most recent bid, according to the sources. One source described Neumann and Baupost’s conversations as preliminary and informal. The Financial Times first reported that Baupost was not engaged.
WeWork declined to comment on this article. In a prior statement, the firm stated that it received “expressions of interest from third parties on a regular basis,” and that it sought to “always act in the best long-term interests of the company.”
A spokeswoman for Neumann declined to comment. In a previous statement, the spokesperson stated that “a coalition of half a dozen financing partners—whose identities are known to WeWork and its advisors—submitted a potential bid” for the firm.
Blurred lines
Alex Spiro of Quinn Emanuel legal firm represents Neumann, as well as Tesla CEO Elon Musk and millionaire rapper Jay-Z. According to two sources with direct knowledge of the case, Neumann, who previously referred to JPMorgan Chase CEO Jamie Dimon as his “personal banker,” did not seek advice from bankers or financial consultants when attempting to acquire WeWork.
Neumann’s participation with his latest firm, Flow, which is one of the bidders for WeWork, adds to the uncertainty. Following his departure from WeWork, Neumann started Flow, a firm that claims to be revolutionizing home ownership and fosters a sense of community among its renters.
Andreessen Horowitz reportedly invested $350 million in Flow in 2022. Marc Andreessen, the venture firm’s co-founder, serves on Flow’s board. Andreessen Horowitz did not return a request for comment.
Neumann’s legal team is also representing Flow in WeWork’s bankruptcy proceedings. Flow and Neumann have a spokesman who confirmed the WeWork bid.
The timing of Neumann’s offer raises concerns about its viability. According to reports, the bid occurred two weeks ago and arrived at a time when the company had yet to demonstrate a feasible path out of bankruptcy.
According to sources, WeWork advisors are not currently conducting a bidding campaign for the company and are instead focused on going through the bankruptcy proceedings in New Jersey.
Then there’s the reputational harm Neumann experienced during his final days at the organization. Prior to WeWork’s unsuccessful IPO in mid-2019, Neumann embarked on a fundraising and spending spree that public market investors concluded was unsustainable. Even though WeWork’s business is in freefall, Neumann earned handsomely.
SoftBank, WeWork’s major investor at the time, eventually led the expulsion of Neumann, which culminated in court. SoftBank is among WeWork’s creditors in bankruptcy court.
Neumann had significant equity in WeWork before to its bankruptcy filing, but like other shareholders, his position was wiped away. Any successful offer by Neumann would require him to first pay off secured creditors, who are first in line for repayment. These creditors have given no indication that they are weighing One individual mentioned Neumann’s bid.
Adam Neumann’s bid to buy back WeWork faces uphill battle due to financing challenges
