Adam Neumann WeWork bid faces questions over financing, marketing strategy

Adam Neumann has despatched a preliminary supply to purchase WeWork out of chapter for greater than $500 million, 5 years after he was ousted by the office-sharing firm he based. However it’s not clear that he has the financing and requisite assist from collectors to consummate a deal.

In making an attempt to reclaim WeWork, Neumann has to cope with a checkered previous on the firm, uncertainty over funding and the issue in valuing a enterprise that is halfway by a restructuring course of. CNBC spoke with a number of individuals acquainted with the corporate and Neumann’s supply. They requested anonymity to talk freely about personal issues.

Funding agency Rithm Capital, which acquired Daniel Och’s Sculptor Capital Administration in November, is one among events fascinated about financing the bid, sources advised CNBC. Rithm’s involvement stays preliminary and the diligence course of is at an especially early stage, one of many individuals stated.

Extra broadly, individuals near the matter say they’re skeptical of whether or not Neumann has dedicated financing lined as much as assist a proposal. That is as a result of Neumann has beforehand named different financing sources in prior communications with WeWork’s advisors that hasn’t come to fruition, the sources say.

For instance, Dan Loeb’s Third Level was beforehand cited in a letter by Neumann’s counsel to WeWork’s chapter advisors as a agency that was offering financing. However the hedge fund rapidly denied involvement and stated discussions had solely been preliminary. Third Level shouldn’t be concerned in any supply, individuals acquainted with the matter advised CNBC.

Baupost Group was additionally floated as a possible financing supply months earlier however did not be part of Neumann’s newest bid, the individuals stated. Conversations between Neumann and Baupost have been preliminary and casual, one supply stated. The Monetary Occasions first reported that Baupost was not concerned.

WeWork declined to remark for this story. In a earlier assertion, the corporate stated it acquired “expressions of curiosity from third events regularly,” and that it labored to “all the time act in the very best long-term pursuits of the corporate.”

Neumann did not instantly reply to a request for remark.

Neumann is represented by regulation agency Quinn Emanuel’s Alex Spiro, who additionally advises Tesla CEO Elon Musk and billionaire rapper Jay-Z. However Neumann, who as soon as known as JPMorgan Chase CEO Jamie Dimon his “private banker,” does not seem to have tapped bankers or monetary advisors in his effort to purchase WeWork, two individuals with direct data of the matter stated.

Including to the confusion is Neumann’s involvement together with his newest enterprise, Circulation, which is without doubt one of the events bidding on WeWork. Following his ouster from WeWork, Neumann based Circulation, a startup that claims it is reinventing dwelling possession and constructing a way of neighborhood amongst its tenants. 

Andreessen Horowitz invested a reported $350 million in Circulation in 2022. Marc Andreessen, the enterprise agency’s co-founder, sits on Circulation’s board. Andreessen Horowitz did not reply to a request for remark.

Neumann’s counsel can also be representing Circulation in WeWork’s chapter proceedings. Circulation and Neumann share a spokesperson, who confirmed the WeWork bid.

The timing of Neumann’s supply additionally raises questions on its viability. The bid got here two weeks in the past, sources stated, and landed at a time when the corporate had but to indicate a viable path to exit chapter.

Sources stated WeWork advisors aren’t at the moment working a bidding course of for the corporate and are as a substitute targeted on shifting by the chapter proceedings in New Jersey.

Then there’s the reputational harm Neumann suffered in his waning days on the firm. Previous to WeWork’s failed IPO in mid-2019, Neumann went on a fundraising and spending binge that public market traders decided was unsustainable. Even with WeWork’s enterprise is freefall, Neumann profited handsomely.

SoftBank, WeWork’s largest investor on the time, in the end spearheaded the ouster of Neumann, an ordeal that led to courtroom. SoftBank is one among WeWork’s collectors in chapter courtroom.

Neumann held vital fairness in WeWork previous to its chapter submitting, however like different shareholders, his fairness stake was worn out. Any profitable bid from Neumann would require that he first repay secured collectors, who’re first in line for reimbursement. These collectors have proven no indication that they’re weighing Neumann’s bid, one individual stated.

WATCH: WeWork founder Adam Neumann is making an attempt to purchase again the corporate