Since his expulsion five years ago, founder Adam Neumann has been mourning the loss of his company WeWork. Now the controversial tech entrepreneur is putting an offer on the table to the now insolvent office broker. The eccentric hasn’t just been working on a comeback since yesterday.
Adam Neumann and his office broker WeWork set out to revolutionize the rental market for companies. But the trend towards working from home, which became even more pronounced during the corona pandemic, caused the business model to falter. The company has never been in the black. Under pressure from investors, Neumann had to resign from his post in 2019.
According to information from the Wall Street Journal, Neumann could now be on the verge of a comeback at WeWork: The former managing director is said to have put an offer for the insolvent company on the table. Neumann is offering more than $500 million, the paper quotes people familiar with the events as saying. But it is not clear how he wants to finance this. In November 2023, WeWork fled into bankruptcy – a remarkable fall for what was once the most valuable startup in the USA, once valued at $47 billion.
Neumann had already contacted WeWork in December to obtain the necessary information for an offer to purchase the company or its assets. He later offered to provide a loan to finance the bankruptcy but still does not have access to that information, according to the letter from his lawyers, seen by The Wall Street Journal. It said the bankruptcy was caused by management’s inability to explore “alternatives” for financial support.
Neumann’s eccentric leadership style was his downfall
“We have said on previous occasions that WeWork is an exceptional company, and it is no surprise that we regularly receive expressions of interest from third parties,” a WeWork spokesperson said. “Our board and advisors review these regularly to ensure we are always acting in the best long-term interests of the company.” The company is concentrating on restructuring in order to exit the bankruptcy process in the second quarter “financially strong and profitable.”
Neumann has been trying to regain control of WeWork since he was fired five years ago. At that time, potential investors criticized the company’s financial prospects and its eccentric management style after the failed IPO. A report in the Wall Street Journal from 2019 also revealed the lavish parties and Neumann’s excessive alcohol and drug consumption. After the layoffs were announced, Neumann is said to have distributed tequila shots and organized a surprise concert by Run-DMC. Furthermore, his private jet is said to have been recalled from Jerusalem once – marijuana was previously hidden on the plane found in a cereal packaging.
In their letter, Neumann’s lawyers painted a brief picture of what he plans to do with WeWork if he returns: “In a hybrid work world in which demand for WeWork’s product is likely to be greater than ever, my clients believe that the synergies and “The management expertise that an acquisition would provide could significantly exceed the value of the debtors on a standalone basis,” the lawyers wrote. “WeWork should at least educate themselves about this potential and not prevent themselves from maximizing value.”
“Business model can basically work”
The bankruptcy process allows WeWork to terminate or renegotiate long-term contracts with property owners. According to investor Philipp Klöckner, the CoWorking business model can work afterwards. The company has recently suffered primarily from excessively high rental prices because many top properties were rented long-term and at top prices. “Now that every fifth office in New York and more than a third of the space in San Francisco are empty, the successor company could benefit from cheaper rents due to the office real estate crisis. If you manage to agree significantly more favorable rental conditions with the beleaguered landlords, “The WeWork business model could be much more attractive,” says Klöckner when asked by ntv.de.
It is also conceivable that individual areas could be converted into residential areas or mixed use. According to Klöckner, this would be closer to the concept of Adam Neumann’s new company Flow. There are so far few details about Flow’s specific business model.
According to initial information, Neumann also wants to be active in the rental apartment market with his new company in the future. He is said to have already bought 3,000 apartments in Atlanta, Nashville, Tennessee, Fort Lauderdale, Florida and Miami. In a blog entry, Marc Andreessen, a future board member, describes that, on the one hand, the company wants to solve the problem of housing shortages in the USA.
Neumann accused WeWork of failings
According to Klöckner, it remains unclear whether Neumann will be able to finance the rescue operation. Alleged partners, such as the hedge fund Thirtpoint or the investor Baupost, seem to distance themselves from supporting the project. “Nevertheless, there are certainly investors who are still convinced of Neumann’s abilities. His new company Flow was financed by the renowned US venture capital financier Andreessen Horowitz,” says the investor.
Shortly after the bankruptcy was announced, Neumann made it clear that he still believes in WeWork’s business model. In a released statement, he expressed his disappointment and accused the company of failings: “It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to leverage a product that is now more relevant than ever. I believe that with the right strategy and a good team, WeWork can emerge successful through a reorganization,” he added.