As Adam Neumann tries to win back WeWork, Dan Loeb plays down his hedge fund's role

MW As Adam Neumann tries to win back WeWork, Dan Loeb plays down his hedge fund's role

By James Rogers

WeWork founder has turned to hedge fund giant Dan Loeb's Third Point in the latest twist in the office-sharing company's saga

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 $(WEWKQ)$ 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."

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.

Related: Adam Neumann is trying to bid for WeWork, reports say

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. (JP:9984), contributing to its $6.2 billion loss in the July to September quarter last year. WeWork's spectacular rise and fall is described in the "WeCrashed" miniseries.

Related: Adam Neumann says WeWork 'failed' to seize opportunities, calls bankruptcy 'disappointing'

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.

Related: Bankrupt WeWork's stock pulls back, continuing rollercoaster ride

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."

Related: WeWork investor SoftBank reports $6.2 billion loss

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."

Neumann has not yet responded to requests for comment from MarketWatch.

Joy Wiltermuth and Steve Goldstein contributed.

-James Rogers

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February 07, 2024 11:15 ET (16:15 GMT)

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