by WeWork founder is trying to buy it
Adam Neumann rose to fame by turning WeWork into a cultural and business phenomenon, before being spectacularly ousted from the workspace operator.
But for the past few months he has been trying to buy the now-bankrupt business; With the help of hedge fund magnate Dan Loeb, DealBook is the first to report.
Neumann’s new real estate agency, Flow Global is pressuring WeWork to consider its acquisition strategy, according to a letter his lawyers sent to WeWork’s advisers on Monday. Flow, which has already raised $350 million from venture capital firm Andreessen Horowitz, reveals in the letter that Loeb’s Third Point would help finance a transaction. (read the letter.)
Flow has sought to purchase WeWork or its assets, as well as provide bankruptcy financing to keep it afloat.
But Flow’s lawyers accused WeWork of putting up obstacles for months. “We write to express our dismay at WeWork’s lack of commitment to even provide information to my clients in what is intended to be a transaction that maximizes value for all stakeholders,” wrote attorneys led by Alex Spiro of Quinn Emanuel, who also represents Elon. Musk and Jay-Z.
It’s the latest turn for WeWork, which throughout its 14 years of history became a symbol of excess venture capital. The company grew rapidly, becoming the largest tenant in many major cities and reaching a paper valuation of $47 billion. And Neumann, backed by billions from Japanese tech giant SoftBank, increasingly presented it as a way to “raise the world’s consciousness.”
But Neumann stepped down as CEO in 2019 after WeWork failed to go public, largely due to investor concerns about its business model and corporate governance. The company began to struggle and repeatedly sought to renegotiate its leases and cut costs. (It’s unclear whether WeWork stakeholders would feel comfortable selling the company back to the man some of them believe helped create their problems.)
WeWork filed for bankruptcy last November. In a restructuring plan filed in bankruptcy court on Sunday, the company said it had more than $4 billion in secured debt alone and that SoftBank was among its largest creditors. At a court hearing on Monday, lawyers for the owners and others complained that WeWork I may not have enough money to pay the rent.
Some experts have suggested that WeWork could be sold for a fraction of its outstanding debt, perhaps as little as $500 million.
Neumann has been trying to invest in WeWork for years. In October 2022, according to the letter, he attempted to raise “up to $1 billion in financing to stabilize WeWork.” But the company’s CEO at the time “shut down that process without explanation,” the lawyers wrote.
When WeWork filed for Chapter 11, Neumann said at that time that “with the right strategy and team, a reorganization will allow WeWork to emerge successfully.” But he has also said that Flow, which focuses on the residential real estate market, “compete or associate” with his former company.
Flow’s lawyers wrote in the letter sent Monday that “in a hybrid work world where demand for the WeWork product should be greater than ever,” the math of combining the two companies “could significantly outweigh” WeWork’s standalone value.
THIS IS WHAT’S HAPPENING
A Treasury Department delegation heads to Beijing for economic talks. Top U.S. officials will hold two days of meetings with their Chinese counterparts to discuss issues including government subsidies, China’s role as a 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 exceed 7 percent. The average rate of a 30-year fixed mortgage reached 7.04 percent on Monday, the first time since December, after better-than-expected employment and manufacturing reports. The average remains below the 8 percent reached in October, a 20-year high; Mark Zandi, chief US economist at Moody’s, recently predicted that if rates returned to that level, it would hurt President Biden’s re-election chances, even as the economy recovers.
Novo Nordisk’s parent company reaches an agreement to increase production of its weight loss drugs. Novo Holdings agreed buy Catalenta major pharmaceutical subcontractor that fills injection pens, for $16.5 billion to help meet demand for Wegovy and Ozempic treatments.
The Meta Oversight Board urges changes to the social media giant’s rules on manipulated media. While the board allowed a doctored video that falsely showed President Biden behaving inappropriately to remain online, it urged the tech giant to change its “incoherent” policy on the matter. The Oversight Board cited the potential impact of those fake videos on the election as reason for action.
Saudi advisors head to the hill
Some of the most powerful bankers and consultants with ties to Saudi Arabia, including top executives at McKinsey and Teneo, will appear before Congress on Tuesday as part of a Senate investigation into the kingdom’s growing influence in American businesses.
Advisers and negotiators are trapped between Washington and Riyadh. Sen. Richard Blumenthal, D-Conn., launched the investigation last year after the PGA Tour reached a tentative deal with LIV Golf, the breakaway competition backed by Saudi Arabia’s Public Investment Fund, known as PIF. (Questions loom over the potential alliance after the PGA Tour announced a new slate of American investors last week.)
Those that will appear include:
Michael Klein of Klein & Co., the veteran Wall Street dealmaker known for having close ties to the Middle East and the PIFincluding advice on Saudi Aramco IPO,
Bob Sternfels, global managing partner at McKinsey, who has advised Saudi Arabia on initiatives including the eventual formation of LIV Golf,
Paul Keary, CEO of Teneo, who advised on the PIF agreement with the PGA Tour,
And Rich Lesser, global president of Boston Consulting Group, whose top executives have had a close relationship with the crown prince.
Blumenthal has summoned the advisers to talk about their work advising the kingdom on deals. The Saudi fund sued the advisors in a Saudi court arguing that they cannot disclose confidential information.
Representatives for Klein and Teneo declined to comment. BCG and McKinsey did not respond to requests for comment.
A PIF spokesperson said it was making “significant efforts” in the Senate’s request for documents, but stressed that Saudi law ultimately has “a right to be respected.” (PIF is working with Raphael Prober, partner at the Akin Gump law firm.)
The back-and-forth highlights the complexity of US relations with Saudi Arabia. The appearance at the Capitol comes just a day after Antony Blinken, the secretary of state, met with Saudi crown princeMohammed bin Salman, to try to restart talks on the normalization of the kingdom’s relations with Israel.
Blumenthal is expected to claim that consultants are hiding behind foreign contracts. ““Refusing to cooperate with this subcommittee would create a dangerous and unsustainable precedent,” he wrote in a memo. (Blumenthal is deeply suspicious of any LIV-PGA deal.)
Executives may respond that they are bound by the lawsuits and that cooperating with the Senate investigation would put their employees in Saudi Arabia at risk.
Negotiators may be left with few options. Congress could seek criminal or civil enforcement of the subpoenas in a US court.
“No matter what they do, they’re going to violate someone’s law,” Julian Ku, a professor at Hofstra University School of Law, told DealBook. “The answer is: obey the country you fear the most.”
“This completely reverses their image as a desirable employer.”
— Meghan Biro, a human resources consultant, about waves of layoffs at Google that employees say have undermined morale. Technology companies have continued Trim jobs reduce costs; the last one was Breakwhich laid off more than 500 workers on Monday.
The multi-billion dollar Bitcoin enigma
Just as Bitcoin enters the Wall Street investment mainstream with a market value approaching $840 billion, a London court is considering a mystery that has been hanging over the sector for years: Who is it? Satoshi Nakamoto”, the pseudonymous creator of the cryptocurrency?
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 became known, and that he owns the intellectual property rights behind the Bitcoin 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 approximately $47 billion.
Lawyers for the Crypto Open Patent Alliance (a nonprofit backed by Coinbase and Dorsey’s digital payments company Block) said in court Monday that Wright’s claims were a “blatant lie.” They ask the court to rule that he is not Satoshi.
The story began in 2008. when a programmer, under the name Satoshi Nakamoto, published an article about Bitcoin, a digital currency that would allow people to make transactions through a shared electronic ledger without traditional intermediaries like governments or banks. The idea was consolidated, but the identity of the creator was unknown.
Many, including Wright, have claimed to be the elusive Satoshi. Wright escalated the narrative by threatening Bitcoin developers with litigation and filing lawsuits alleging intellectual property violations.
In an opening statement Monday, Wright’s attorney said the evidence would show that Wright was the author of the white paper.
A COPA representative told DealBook that it would present evidence saying that Wright’s alleged tests are false and that they were produced in sources or on paper that did not exist in 2008.
Crypto companies want this case to serve as a warning to potential Satoshis. They also want to send a clear message to Wright: stop suing cryptocurrency developers, an action they fear is driving some programmers away from working on the Bitcoin blockchain.
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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)
In presentation materials for potential investors, Elon Musk’s xAI reportedly touts access to “Muskonomy” the billionaire’s constellation of companies. (Bloomberg)
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