Daniel Loeb is playing down his role and that of his hedge fund in helping Adam Neumann buy back WeWork just over four years after his ouster from the now-bankrupt office-sharing company.
The latest twist in the WeWork
saga emerged Tuesday, with reports that Neumann and his real-estate company Flow were exploring an offer to buy WeWork, with the help of Loeb’s Third Point, according to a letter obtained by Bloomberg News and the New York Times.
But in a statement provided to MarketWatch, Third Point said that the hedge fund has had only preliminary conversations with Flow and Neumann “about their ideas for WeWork, and has not made a commitment to participate in any transaction.”
“I think they are taking a wait-and-see attitude,” Mark Indelicato, managing partner of Thompson Coburn’s New York office, and a member of the law firm’s financial restructuring and bankruptcy group, told MarketWatch. “They are waiting to see what the reaction will be.” Thompson Coburn has no involvement in Neumann’s attempt to buy back the company.
Neumann, who was ousted as WeWork CEO in October 2019, could benefit from the hedge fund giant’s profile and reputation as he attempts to win back his former company, according to Cole Smead, CEO of Smead Capital Management, whose company has a position in WeWork rival IWG. “I think highly of Dan Loeb — I think [he] is a good man,” Smead told MarketWatch, pointing to Loeb’s charitable works.
Third Point had approximately $10.5 billion assets under management as of November 2023.
After co-founding WeWork, Neumann loaded the company with debt while overseeing its meteoric cash-burning rise, which involved taking out long-term lease obligations that peaked near $50 billion in 2019. That same year, Neumann was ousted in the wake of a failed attempt to IPO at a valuation of $49 billion.
With new management in place, WeWork eventually went public two years later at a $9 billion valuation, but continued to burn cash. The beleaguered company eventually filed for bankruptcy in November 2023. The bankruptcy also hit WeWork’s majority investor SoftBank Group Corp.
contributing to its $6.2 billion loss in the July-to-September quarter last year. WeWork’s spectacular rise and fall is captured in Apple TV’s
Neumann went on to found the real-estate company Flow. The former WeWork CEO made at least $1 billion from the office-sharing company, according to the Wall Street Journal’s calculations. In a filing in bankruptcy court, WeWork said Neumann has failed to cooperate with an independent investigation looking into the company’s transactions with him and the settlement agreement when he left.
WeWork said that it regularly receives interest “from external parties,” but did not mention Neumann specifically, in a statement sent to MarketWatch.
“WeWork is an extraordinary company. As such, we receive expressions of interest from external parties on a regular basis,” it said. “We and our advisers always review those approaches with a view to acting in the best interests of the company.
The company believes that addressing its “unsustainable rent expenses” and restructuring the business will ensure it remains positioned as an “independent, valuable, financially strong and sustainable company long into the future.”
But Smead Capital Management’s Cole Smead told MarketWatch that he is not totally surprised to hear Third Point mentioned in the context of a potential WeWork deal.
“I think people used to think about Third Point as a value investor-type shop,” he told MarketWatch. “But they are more like a growth shop occasionally making growth/venture investments—this deal kind of fits into a growth/venture profile.”
Neumann, who earned celebrity status during WeWork’s rise, would face major challenges turning the company around, according to Smead.
“With Neumann, he can sell the sizzle, can he sell the steak?” said Smead. “I think that’s a real question.”
“The question is ‘can they go out and drive higher returns on the business’?” he added. “They are in bankruptcy because the returns were lower than the cost of capital.”
Thompson Coburn’s Indelicato described Neumann’s effort as “an opportunistic buy” and also highlighted the challenges in WeWork’s path.
“How much debt is it really going to be able to carry coming out of the gate?” he said. “I am not sure that the commercial real-estate market has fully reset yet and what the need for WeWork is going to be going forward.”
George Singer, a corporate finance partner at law firm Holland & Hart, told MarketWatch that WeWork has not been able to achieve the hoped-for results in its Chapter 11 bankruptcy case. “Its challenges to pursuing a successful restructuring continue with recent revelations in court that the embattled office-sharing company has not yet been able to obtain all of the concessions it believes are necessary from landlords to implement a hoped-for restructuring plan,” he said. “The hundreds of leases the company remains saddled with are a strain on its finances.”
Citing a bankruptcy court filing, the Wall Street Journal recently reported that WeWork withheld about about $33 million in January rent payments as a lease-renegotiation tactic.
Neumann clearly sees an opportunity, hence his plan to buy the company, or its assets, out of bankruptcy, according to Singer. “Financing, and a lot of it, would be required for any such transaction,” he added. “WeWork needs a plan and the coming weeks, with February rent now due, will shed further light on the path forward for both WeWork and Neumann.”
Holland & Hart is not involved with any of the parties in Neumann’s plan to buy back WeWork.
Neumann has not yet responded to requests for comment from MarketWatch.
Joy Wiltermuth and Steve Goldstein contributed.