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- WeWork’s survival plan is going to place control of the company in the hands of a real tech company, Yardi Systems, one of the leading technology providers to the real estate industry.Â
- WeWork founder Adam Neumann had assembled a team to help him buy his former company back, but unless creditors vote to reject the new bankruptcy exit plan, he’s out.
- WeWork in its early days had been labeled a tech company unlike its rivals, despite its lack of tech knowledge and resources, but now it could now become one after all.
In those bygone days when Adam Neumann ran WeWork and bankers valued it at $47 billion or even more, part of the justification for such a high value was that WeWork was a tech company, unlike its rival IWG, which was just a boring real estate firm and thus destined to be low growth and subject to the ebb and flow of the economy.Â
The irony of this perception was that IWG had more tech knowledge and resources than WeWork did, and IWG’s CEO Mark Dixon had a better handle on the industry tech than Adam Neumann did.
Following WeWork’s collapse into bankruptcy, a greater irony is that WeWork’s survival plan is now going to place control of the company in the hands of a real tech company, Yardi Systems — one of the leading technology providers to the real estate industry.Â
One must wonder whether Yardi’s board would ever have wanted to own WeWork or even contemplated investing in it, but when you are a big creditor of a bankrupt company, the options can be limited.
The deal approved in outline this week by the bankruptcy court involves senior creditors investing $450 million of new money into the business, of which $337 million will come from Yardi in exchange for 60% of the equity.Â
The balance of the fresh capital comes from a group of hedge funds, which gives them 20% of the equity to Yardi’s 60%. The final 20% is a debt for equity swap by WeWork’s creditors, including Softbank.
As widely reported, Adam Neumann had assembled a team of advisors to help him try and buy his former company out of the bankruptcy procedure, claiming that he was willing to offer $650 million, more than the Yardi deal, but the judge refused to delay the bankruptcy timetable to allow Neumann and his backers 12 days to do due diligence.
As it is, Neumann is out, unless the creditors vote to reject the bankruptcy plan at their meeting on May 30.
