Adam Neumann Wants to Take Over WeWork
WeWork’s founder is trying to buy it
Adam Neumann shot to fame by turning WeWork into a cultural and business phenomenon, before being ousted from the work space operator in dramatic fashion.
But for the past several months, he has been trying to buy the now-bankrupt business — with the help of the hedge fund mogul Dan Loeb, DealBook is the first to report.
Neumann’s new real estate company Flow Global is pushing WeWork to consider its takeover approach, according to a letter his lawyers sent to WeWork’s advisers on Monday. Flow which has already raised $350 million from the venture capital firm Andreessen Horowitz, disclosed in the letter that Loeb’s Third Point would help finance a transaction. (Read the letter.)
Flow has sought to buy WeWork or its assets, as well as provide bankruptcy financing to keep it afloat.
But Flow’s lawyers accused WeWork of stonewalling for months. “We write to express our dismay with WeWork’s lack of engagement even to provide information to my clients in what is intended to be a value-maximizing transaction for all stakeholders,” wrote the lawyers led by Alex Spiro of Quinn Emanuel, who also represents Elon Musk and Jay-Z.
It’s the latest twist for WeWork, which over its 14-year history became a symbol of venture capital excess. The company grew rapidly, becoming the biggest tenant in many major cities and attaining a paper valuation of $47 billion. And Neumann — backed by billions from the Japanese tech giant SoftBank — increasingly pitched it as a way to “elevate the world’s consciousness.”
But Neumann stepped down as C.E.O. in 2019 after WeWork failed to go public, largely because of investor concerns about its business model and corporate governance. The company began to struggle and sought repeatedly to renegotiate its leases and cut costs. (It’s unclear whether WeWork’s stakeholders would be comfortable selling the company back to the man whom some of them see as helping to create its troubles.)
WeWork filed for bankruptcy this past November. In a restructuring plan filed with the bankruptcy court on Sunday, the company said that it had more than $4 billion in secured debt alone and that major creditors included SoftBank. At a court hearing on Monday, lawyers for landlords and others complained that WeWork may not have enough money to pay rent.
Some experts have suggested that WeWork could be sold for a fraction of its outstanding debt, perhaps for as little as $500 million.
Neumann has sought to invest in WeWork for years. In October 2022, according to the letter, he sought to arrange “up to $1 billion in financing to stabilize WeWork.” But the company’s C.E.O. at the time “shut down that process without explanation,” the lawyers wrote.
When WeWork filed for Chapter 11, Neumann said at the time that “with the right strategy and team, a reorganization will enable WeWork to emerge successfully.” But he has also said that Flow — which is focusing on the residential real estate market — would “compete or partner” with his former company.
Flow’s lawyers wrote in the letter sent on Monday that “in a hybrid work world where demand for WeWork’s product should be greater than ever,” the math of combining the two companies “could significantly exceed” WeWork’s stand-alone value.
HERE’S WHAT’S HAPPENING
A Treasury Department delegation heads to Beijing for economic talks. Senior U.S. officials will hold two days of meetings with their Chinese counterparts to discuss issues including government subsidies, China’s role as creditor to developing nations and the countries’ macroeconomic outlook. The discussions could pave the way for a second trip to Beijing by Treasury Secretary Janet Yellen in as many years.
Mortgage rates surpass 7 percent. The average rate for a 30-year fixed mortgage hit 7.04 percent on Monday, the first time since December, after stronger-than-expected jobs and manufacturing reports. The average remains below the 8 percent hit in October, a 20-year high; Mark Zandi, Moody’s chief U.S. economist, recently predicted that if rates returned to that level, it would hurt President Biden’s re-election chances, even as the economy rebounds.
Novo Nordisk’s parent strikes a deal to ramp up production of its weight-loss drugs. Novo Holdings agreed to buy Catalent, a major pharmaceutical subcontractor that fills injection pens, for $16.5 billion to help meet demand for the treatments Wegovy and Ozempic.
Meta’s Oversight Board urges changes to the social media giant’s rules on manipulated media. While the board allowed an altered video falsely depicting President Biden behaving inappropriately to stay online, it urged the tech giant to change its “incoherent” policy on the matter. The Oversight Board cited the potential impact of such faked videos on elections as a reason to act.
Saudi advisers head to the Hill
Some of the most powerful bankers and consultants with ties to Saudi Arabia, including top executives from McKinsey and Teneo, are set to appear in Congress on Tuesday as part of a Senate investigation into the kingdom’s growing influence in U.S. business.
The advisers and deal makers are caught between Washington and Riyadh. Senator Richard Blumenthal, Democrat of Connecticut, started the investigation last year after the PGA Tour struck a tentative deal with LIV Golf, the breakaway competition backed by Saudi Arabia’s Public Investment Fund, which is known as PIF. (Questions hang over the potential alliance after the PGA Tour announced a new slate of U.S. investors last week.)
Those set to appear include:
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Michael Klein of Klein & Co., the veteran Wall Street deal maker known to have close ties to the Middle East and the PIF, including advising on the I.P.O. of Saudi Aramco,
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Bob Sternfels, the global managing partner at McKinsey, which has advised Saudi Arabia on initiatives including the eventual formation of LIV Golf,
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Paul Keary, the C.E.O. of Teneo, which advised on the PIF’s deal with the PGA Tour,
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And Rich Lesser, the global chair of Boston Consulting Group, whose top executives have had a close relationship with the crown prince.
Blumenthal has subpoenaed the advisers to speak about their work advising the kingdom on deals. The Saudi wealth fund sued the advisers in a Saudi court arguing that they cannot divulge confidential information.
Representatives for Klein and Teneo declined to comment. B.C.G. and McKinsey didn’t respond to requests for comment.
A PIF spokesman said that it was making “significant efforts” on the Senate’s request for documents, but stressed that ultimately Saudi law is “entitled to be respected.” (PIF is working with Raphael Prober, a partner at the law firm Akin Gump.)
The tug of war highlights the complexity of U.S. relations with Saudi Arabia. The appearance on Capitol Hill comes just a day after Antony Blinken, the secretary of state, met with the Saudi crown prince, Mohammed bin Salman, to try to restart talks on the kingdom normalizing relations with Israel.
Blumenthal is expected to argue that the consultants are hiding behind foreign contracts. “Refusal to cooperate with this subcommittee would create a dangerous and unsupportable precedent,” he wrote in a memo. (Blumenthal is deeply suspicious of any LIV-PGA deal.)
The executives may respond that they’re bound by the lawsuits and that cooperating with the Senate inquiry would put their employees in Saudi Arabia at risk.
The deal makers may be left with few options. Congress could seek criminal or civil enforcement of the subpoenas in a U.S. court.
“No matter what they do, they’re going to violate someone’s law,” Julian Ku, a professor at Hofstra University Law School, told DealBook. “The answer is: Comply with the country that you’re most scared of.”
“It completely reverses their image as a desirable employer.”
— Meghan Biro, a human resources consultant, on the waves of layoffs at Google that employees say have sapped morale. Tech companies have continued cutting jobs to pare costs; the latest was Snap, which laid off more than 500 workers on Monday.
The multibillion-dollar Bitcoin riddle
Just as Bitcoin moves into the mainstream of Wall Street investing with a market value nearing $840 billion, a London court is considering a mystery that’s been hanging over the sector for years: Who is “Satoshi Nakamoto,” the cryptocurrency’s pseudonymous creator?
The legal battle pits a group backed by Jack Dorsey against Craig Wright, an Australian computer scientist who is expected to testify on Tuesday. Wright insists that he is Satoshi, as the creator came to be known, and that he owns the intellectual property rights behind Bitcoin’s blockchain. Skeptics say Wright is lying, and have challenged him to produce the private keys, or code, to an original stash of Bitcoins that today would be worth roughly $47 billion.
Lawyers for the Crypto Open Patent Alliance (a nonprofit backed by Coinbase and Dorsey’s digital payments company, Block) said in court on Monday that Wright’s claims were a “brazen lie.” They are asking the court to rule that he is no Satoshi.
The story began in 2008 when a programmer, under the name Satoshi Nakamoto, published a paper about Bitcoin, a digital currency that would let people transact via a shared electronic ledger without traditional intermediaries like governments or banks. The idea took hold, but the creator’s identity remained unknown.
Many, including Wright, have claimed to be the elusive Satoshi. Wright stepped up the narrative by threatening Bitcoin developers with litigation and filing suits alleging I.P. violations.
In an opening statement on Monday, Wright’s lawyer said the evidence would show that Wright authored the white paper.
A C.O.P.A. representative told DealBook that it would present evidence saying Wright’s purported proofs are fake and that they were produced in fonts or on paper stock that did not exist in 2008.
Crypto companies want this case to serve as a warning to would-be Satoshis. They also want to send a clear message to Wright: stop suing crypto developers, action they fear is driving some programmers away from working on the Bitcoin blockchain.
THE SPEED READ
Deals
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Blackstone is said to be weighing a takeover bid for the skin care company L’Occitane, which has a market value of $5.4 billion. (Bloomberg)
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In presentation materials for prospective investors, Elon Musk’s xAI reportedly touts access to the “Muskonomy,” the billionaire’s constellation of companies. (Bloomberg)
Policy
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