Adam Neumann WeWork’s bid faces questions over financing and business plan

Adam Neumann has submitted a preliminary offer to buy WeWork out of bankruptcy for more than $500 million, five years after he was ousted from the office-sharing company he founded. But it is unclear whether he has the necessary financing and support from creditors to make a deal.

As Neumann tries to take back WeWork, he must contend with a checkered past at the company, uncertainty over financing and the difficulty of valuing a company that is in the midst of a restructuring process. CNBC spoke to several people familiar with the company and Neumann’s offering. They requested anonymity to speak freely about private matters.

Investment company Rhythm capital, which acquired Daniel Och’s Sculptor Capital Management in November, is one of the parties interested in financing the offering, sources told CNBC. Rithm’s involvement remains preliminary and the diligence process is at an extremely early stage, one of the people said.

More generally, people familiar with the matter say they are skeptical that Neumann has set aside funding to support a bid. That’s because Neumann previously named other funding sources in previous communications with WeWork advisors that failed to materialize, the sources say.

For example, Dan Loeb’s third point was previously cited in a letter from Neumann’s attorney to WeWork’s bankruptcy advisors as a company providing financing. But the hedge fund quickly denied involvement and said the discussions had only been preliminary. Third Point is not involved in any bids, people familiar with the matter told CNBC.

Baupost Group had also been floated months earlier as a potential funding source, but did not join Neumann’s latest bid, the people said. The conversations between Neumann and Baupost were preliminary and informal, a source said. The Financial Times initially reported that Baupost was not involved.

WeWork declined to comment for this story. In an earlier statement, the company said it received “expressions of interest from third parties on a regular basis” and that it worked to “always act in the best long-term interests of the company.”

Neumann did not immediately respond to a request for comment.

Neumann is represented by Alex Spiro of law firm Quinn Emanuel, who also advises Tesla CEO Elon Musk and billionaire rapper Jay-Z. But Neumann, who once called JP Morgan Chase Chief Executive Jamie Dimon, his “personal banker,” does not appear to have contacted bankers or financial advisors in his bid to buy WeWork, two people with direct knowledge of the matter said.

Adding to the confusion is Neumann’s involvement in his latest venture, Flow, which is one of the parties bidding for WeWork. After his ouster from WeWork, Neumann founded Flow, a startup that claims to be reinventing homeownership and building a sense of community among its tenants.

Andreessen Horowitz invested $350 million in Flow in 2022. Marc Andreessen, co-founder of the venture capital firm, sits on Flow’s board of directors. Andreessen Horowitz did not respond to a request for comment.

Neumann’s attorney also represents Flow in WeWork’s bankruptcy proceedings. Flow and Neumann share a spokesperson who confirmed the WeWork offer.

The timing of Neumann’s bid also raises questions about its feasibility. The offer came two weeks ago, the sources said, and came at a time when the company had yet to show a viable path out of bankruptcy.

Sources said WeWork advisors are not currently running a bidding process for the company and are instead focused on bankruptcy proceedings in New Jersey.

Then there’s the reputational damage Neumann suffered in his declining days at the company. Before WeWork’s failed IPO in mid-2019, Neumann went on a fundraising and spending binge that public market investors deemed unsustainable. Even as WeWork’s business is in free fall, Neumann has profited handsomely.

SoftBank, WeWork’s largest investor at the time, ultimately led Neumann’s ouster, an ordeal that ended up in court. SoftBank is one of WeWork’s creditors in bankruptcy court.

Neumann held a significant stake in WeWork before the bankruptcy filing, but, like other shareholders, his equity stake was wiped out. Any successful bid by Neumann would require him to first repay secured creditors, who are first in line for repayment. Those creditors showed no signs of weighing Neumann’s offer, one person said.

CLOCK: WeWork founder Adam Neumann is looking to buy back the company