- Adam Neumann, the co-founder and former CEO of WeWork, is attempting to repurchase the now-bankrupt company, but the offer is being met with skepticism and is seen by many as unrealistic given his previous disastrous leadership and the company’s massive debt.
- Neumann’s bid involves taking on WeWork’s substantial debts, which include nearly $4 billion in senior debt, making the company’s shares effectively worth less than zero.
- Critics argue that Neumann’s track record does not inspire confidence in his ability to manage WeWork successfully, suggesting that the company needs a management team with proven coworking industry experience to have any chance of being revived.
Adam Neumann, the former CEO of WeWork and probably the single person most responsible for its bankruptcy, if anything in the WeCrashed documentary can be believed, is now trying to buy the company back for a dollar.ย
That is probably one of the most ludicrous sentences I have ever typed, but it is true, and his lawyers are protesting that neither the company nor the bankruptcy court is treating his attempt with the seriousness it deserves, according to the letter they sent out on Feb. 5.ย
I am not the only person to find the idea of Adam Neumann returning to run WeWork ludicrous. No less a commentator than Bloombergโs Matt Levine put it like this in his Feb. 6 column, โThe short version of this trade is that Adam Neumann started WeWork, sold it to SoftBank Group Corp. head Masayoshi Son for $47 billion in one of the greatest feats of salesmanship ever, left, watched it collapse, and will now buy it back for $0.โ
Of course, as Levine goes on to explain, Neumann would not actually get the company for free, because there is a very large amount of debt owed by the company, of which almost $4 billion is first and second lien senior debt, and anyone who buys the company will have to take on the debt as well.ย
The companyโs shares are not just worthless, but they have a large negative value and are, quite literally, worth less than nothing.
The current bankruptcy plan before the court involves persuading the holders of the two most senior tiers of debt to swap it into equity, and wiping out the lower tiers and the shareholders completely. To have a chance to get the company back, Neumann would have to offer a better deal to the creditors than that, which would presumably mean paying back at least some of the debt.ย
Not only that, but to have any chance of surviving beyond the short term, the company would need an injection of fresh cash to fund its operations.
Neumann has a new vehicle called Flow (and why not, there are weirder names out there?) and he is working with a well-known finance firm, Third Point. Together they have been talking to potential investors for WeWork v2. It is not known whether these investors include SoftBank, but if it does, I will certainly run out of suitable adjectives to use in my next article. He needs other investors because even though he personally took $1.7 billion out of WeWork, that wouldnโt be enough to get it through the bankruptcy and into profitability, and he would not want to take the risk anyway.
The most ludicrous aspect of this idea is, however, not the amount of money required, nor any of the other issues identified by Levine in his article, it is simply that Neumann has shown beyond any doubt that he has no clue how to run a coworking company. The managers who have been running it since he was ousted also didnโt have much of a clue, but the ship was already heading for the iceberg when they took over. The difference is the extent of their respective cluelessness.ย
Neumann is orders of magnitude more clueless than his successors.
The only way to save WeWork, as I have said several times before, is to put in a management team that has experience of running a business in that industry successfully. Until that is done, any more money invested in that company is good money after bad.ย
Politely ignoring Neumannโs lawyerโs letter is exactly the right response.
