NEW YORK – WeWork never figured out how to make money. Mr Adam Neumann sure did.
The office-leasing business declared bankruptcy this week, two years after finally going public minus its infamous co-founder and former chief executive.
It has US$19 billion (S$26 billion) of liabilities and US$15 billion of assets. Long-time investors, including Softbank Group and the Vision Fund, will add to the enormous losses they have already taken on the venture.
“It has been challenging for me to watch from the sidelines as WeWork has failed to take advantage of a product that is more relevant today than ever before,” Mr Neumann, 44, said in a statement.
But a part of Mr Neumann might be thankful he was forced out in 2019 following the company’s disastrous first attempt at an initial public offering.
While battering his reputation, the exit left him with plenty of liquidity, and he is still worth US$1.7 billion, according to the Bloomberg Billionaires Index.
To be sure, WeWork’s failure hurt Mr Neumann’s wealth. When it went public in a merger with a special purpose acquisition company in 2021, Mr Neumann had a fortune of US$2.3 billion, according to the index, with nearly one-third in WeWork shares. They have since fallen more than 99 per cent.
But the deal also revealed how he managed to extract huge amounts of cash from WeWork in better times.
The former CEO’s name was mentioned 197 times in a merger filing alongside eye-watering payouts, including a US$185 million non-compete agreement, US$106 million settlement payment and US$578 million received for shares sold by Mr Neumann’s We Holdings to SoftBank.
It also outlined a US$432 million loan from the Japanese firm to Mr Neumann, secured by some of his now almost worthless WeWork stake.
Meanwhile, WeWork’s bankruptcy is costing SoftBank, founded and led by billionaire Masayoshi Son, an estimated US$11.5 billion in equity losses, with another US$2.2 billion in debt still on the line.
The bankruptcy process is expected to take months and will decide how creditors divide the remains of the company.
So far, court papers show that billions of dollars of the firm’s debt will be converted into equity, while nearly all shareholders and owners of low-ranking bonds will be wiped out.
New venture for Mr Neumann
These days, Mr Neumann is busy with a new start-up, Flow, which received a US$350 million investment from venture capital firm Andreessen Horowitz at a US$1 billion valuation in August 2022 before even beginning operations.
Flow will operate multi-family residential properties that aim to foster a feeling of ownership and community. At least some of the residential properties were already owned by Mr Neumann.
Because his own investment into the company could not be determined, Flow has not been factored into Mr Neumann’s fortune, meaning he could be even wealthier than Bloomberg’s figure.
Not all of his investments outside of WeWork have been going so well.
His family office fell behind on interest payments on a US$31 million mortgage tied to a San Jose, California, office building, according to an October mortgage filing.
Mr Neumann famously invested in office buildings, some of which were rented back to WeWork, one of the conflicts of interest that sunk the first IPO. He no longer rents any buildings to WeWork, according to filings, meaning he will not be one of the landlords dealing with lease renegotiations during its bankruptcy.
His connections to WeWork might not be completely finished.
Mr Neumann, who no longer has a non-compete with the company, has been approached about the possibility of getting involved in the business post-bankruptcy, according to a person familiar with the discussions.
His statement even hinted at the possibility.
“With the right strategy and team, a reorganisation will enable WeWork to emerge successfully,” Mr Neumann said. BLOOMBERG
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