WeWork returns to public markets as former CEO Adam Neumann reappears
October 22, 2021
Some two years ago, office-sharing company WeWork withdrew its IPO plans after struggling to find investors willing to invest at a $47 billion-plus valuation. Much of the stories honed in on CEO and co-founder, Adam Neumann, whose partying and alleged self-dealing pointed to a lack of checks-and-balances at the company.
On Thursday, the company finally went public in a merger with BowX Acquisition, a special purpose acquisition company with quite a few changes: No longer is Neumann CEO—instead, it was real estate executive Sandeep Mathrani that appeared at the New York Stock Exchange. Gone too was the company’s $47 billion valuation—instead, the company, even after a 13% jump in its stock price, is still valued at a fraction of that: $10.9 billion.
The company itself says it has made significant changes to lower costs—beyond the headlines of offloading frivolous investments like a wave-pool company, the company has also said that it has cut costs by $2 billion since the fall of 2019, in part by exiting or amending some 500 leases in buildings that were underperforming. It also moved away from overseas markets like China, selling a majority stake of its business for $200 million in 2020.
Along with a fresh roster of investors, including Insight Partners, Starwood Capital, and Fidelity Management, WeWork bulls also believe that the overall world has shifted to its benefit, as more and more workers look to work outside of a centralized office.
But there are also things that have stayed very much the same for WeWork: Kneecapped by the global pandemic, its total revenue has still yet to recover from the doldrums of the crisis. While that figure sat at $756 million in the second quarter of 2019, it was $593 million in the second quarter of 2021. And even on an adjusted EBITDA basis, the company still remains unprofitable. And while the more bombastic language from WeWork’s 2019 IPO filing is gone, flames of that past optimism remain: The company is expecting a quick bounceback in the amount it will earn per membership, while simultaneously growing its total membership (page 20 of this presentation), this year. While WeWork points to ways to grow by partnering more with real estate-related companies that have faced struggles in the pandemic (Saks Fifth Avenue, for example), the question that gripped the company in 2019 still remains: Will the company justify its valuation?
At any rate, it’s true: WeWork is not gone—neither is, as it seems, Neumann, who after disappearing from the limelight in 2019 made a very public appearance Thursday morning to celebrate the listing in another part of New York City. Despite his public battles with SoftBank, Neumann still holds about 11% of WeWork (he was ousted as CEO in 2019). Though he has given up most of his voting rights, that along with other severance packages means he is still, yes, a billionaire.
Neumann played a major role in the WeWork fallout. But the reality is that he won’t be punished by any sort of ban from the industry. Armed with that newly liquid wealth (though he is barred from selling for nine months), it seems, is interested in “building another giant business,” per the Wall Street Journal. And even if that doesn’t work out, Neumann has been making investments, making a $30 million bet in Alfred, a real estate startup.
TRUMP’S TRUTH SOCIAL: There are two other alternative versions of yesterday’s newsletter, one diving into the office-sharing startup above and another into PayPal’s reported courting of Pinterest for a potential price of about $45 billion. And then this newsletter got thwacked by DWAC—or rather, news of DWAC, the special purpose acquisition company that is planning to take former President Donald Trump’s yet-to-be-launched social media company public. But then the news didn’t stop.
As predicted, it became a meme stock. Digital World Acquisition rose 350% on Thursday and then rose yet another near 200% this morning, giving it a total valuation of about $4.3 billion—a massive step up from the questionable $1.7 billion valuation DWAC and Trump Media and Technology Group had given the company. All for a company that has yet to post any sort of financials—which puts it at risk for quite a bit of volatility.
Jessica Mathews compiled the IPO and SPAC sections of this newsletter.
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- Summa Equity added Matthias Fink as a partner.
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