Adam Neumann, the controversial co-founder and former CEO of WeWork, is reportedly leading an investor group that has offered $500 million to buy the struggling office sharing company out of bankruptcy. The bid seeks to regain control of the company that Neumann once led and took public, before his self-dealing and management missteps forced him out in 2019.
Background of WeWork’s Rise and Fall
WeWork began in 2010 as a hip co-working startup that offered flexible shared office spaces and a sense of community to freelancers and startups. Under Neumann’s visionary leadership, the company grew at a breakneck pace, expanding to hundreds of locations globally.
However, when WeWork filed for a highly anticipated IPO in 2019, investors balked at its staggering losses and governance issues, including Neumann securing unusual control and personal payouts. The failed IPO and revelations of Neumann’s excesses forced him out as CEO, with a generous $1.7 billion golden parachute exit package.
A subsequent white knight investment from Softbank valued WeWork at just $8 billion, a fraction of its prior $47 billion valuation. The company continued to bleed money and struggled with vacancies during the pandemic. It finally filed for Chapter 11 bankruptcy in 2022 when it ran out of cash, with a plan to reemerge as a privately held company.
Neumann Seeks Second Chance with Support of Loeb
Neumann now aims to buy WeWork out of bankruptcy and regain control. He has partnered with private equity firm Third Point, run by activist investor Dan Loeb. Their bid is reportedly backed by $300 million from Third Point, with Neumann contributing personally and raising further funds.
The offer comes amid signs of optimism for WeWork under CEO Sandeep Mathrani. Occupancy has rebounded to 80%, and the bankruptcy loan has provided breathing room for a turnaround. However, some creditors still support selling the company to recoup losses from itscrash.
Neumann likely sees the company as undervalued and ripe for turnaround under his leadership again. Third Point’s backing lends credence given Loeb’s strong track record as an investor.
Bid Faces Hurdles with Creditors and Public Investors
The bid would need approval by major creditors and WeWork’s board. Some creditors may prefer alternatives to fund a higher recovery on their claims. It may also face resistance from public shareholders if they believe the price undervalues a potential turnaround.
The controversial history with Neumann poses further challenges. Many shareholders suffered steep losses from the failed IPO and may oppose allowing Neumann to run WeWork again after his past governance lapses. Given ongoing frustration with Neumann, a deal is far from certain.
Implications If Neumann Regains Control
If Neumann succeeds in gaining control again, he would likely pursue an aggressive growth strategy similar to his past approach. The flexible office market remains massive, supporting WeWork’s potential for expansion under stronger management.
However, Neumann would need to avoid repeating past mistakes by instilling financial discipline and stronger governance. Any ambitions to eventually take WeWork public again would require regaining investor trust in the company’s metrics and management.
Given WeWork’s challenges and Neumann’s mixed track record, many analysts remain skeptical of his ability to lead a turnaround. Some believe external management still provides the best odds of success. Nonetheless, some comeback attempts have succeeded, and Neumann’s bold bid cannot be counted out.
Key Details of Buyout Bid
| Bid Details | Description |
|---|---|
| Amount | $500 million |
| Lead bidders | Adam Neumann + Third Point (Dan Loeb) |
| Capital committed | $300 million (Third Point) |
| Additional fundraising | From Neumann and other backers |
| Bid timing | February 2024 (during Ch. 11 bankruptcy) |
| Company valuation implied | $4-5 billion |
| Board approval needed? | Yes |
| Aims to take company public again? | Likely, if bid succeeds |
The ambitious bid tests whether Neumann can achieve a second act with WeWork. Given his complicated legacy there, it promises to spark strong reactions as it proceeds through bankruptcy court and creditor negotiations in coming months.
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