Will Adam Neumann Buy Back WeWork?

1. 0:00 – 0:30

   WeWork’s bankruptcy and the rumor: Adam Neumann wants it back

   1. KSKara Swisher0:00

      WeWork co-founder Adam Neumann is reportedly trying to buy back the bankrupt company. (laughs) This is my favorite story. I thought you'd love it. Reminder, WeWork filed for bankruptcy in November of 2023, four years after Adam Neumann stepped down. Neumann's attempts to purchase, uh, apparently stretch back to October 2022 when he attempted to arrange a billion dollars in financing, but he was stonewalled by former CEO Sandeep Mathrani. The letter was sent by Neumann's counsel, cited the support of Dan Loeb's hedge fund, Third Point. But in response, the fund said it only had preliminary conversations

2. 0:30 – 0:42

   “Funding secured” vibes: Third Point distances itself from Neumann’s pitch

   1. KSKara Swisher0:30

      with Neumann, oh, look at that, and had not made a commitment to participate at, you know, funding secured, I guess. Um, uh, I... Just go for it, Scott. You're the, you're the WeWork guy.

3. 0:42 – 1:12

   Scott’s take: Neumann’s shamelessness, SoftBank, and the “saving face” theory

   1. SGScott Galloway0:42

      Well, uh- (sighs) you gotta give the guy credit. I mean, he kinda has no shame. I, I believe that the reason Adam Neumann was not brought up on criminal charges, I don't know if he would've been found guilty, and the reason why, um, Elizabeth Holmes is in prison is that... is, is a cultural issue involving saving face. And that is, uh, Masayoshi-san decided, or Masa, didn't wanna lose face and declare bankruptcy and say that he'd been

4. 1:12 – 1:43

   The buyout payday: why Neumann’s exit is described as unprecedented

   1. SGScott Galloway1:12

      fooled by Adam Neumann, um, and as a result, uh, Adam Neumann, who is the ultimate poker player in terms of just kind of enormous balls said, "I'll let this thing go under unless you buy me out at a ridiculous premium." He walked away with, I think, 10 or... No one has ever got a 10% commission. That has never happened before. Usually the complaint is, "Okay, this company's very profitable, but you're overpaying the CEO." I mean, y- you know, if you, whatever you think about Elon Musk compensation and that, that

5. 1:43 – 2:24

   From WeWork to housing: the post-WeWork rebrand and VC reputational risk

   1. SGScott Galloway1:43

      the compensation committee was not representing all shareholders and could've, you know, they, they probably could've got the same deal paying him $10 billion, the, this is unprecedented. And he is shameless. He went out and immediately did a high-profile thing around trying to pretend that buying apartments was somehow like-

   2. KSKara Swisher2:00

      Yeah.

   3. SGScott Galloway2:00

      ... a chutz and something-

   4. KSKara Swisher2:01

      Where did that go?

   5. SGScott Galloway2:02

      ... that flow.

   6. KSKara Swisher2:02

      Where did that go?

   7. SGScott Galloway2:03

      I think, I think Andreessen Horowitz is probably already regretting getting in bed with this guy. It's not a good look for them.

   8. KSKara Swisher2:09

      Mm-hmm.

   9. SGScott Galloway2:09

      And now he's back saying, uh, anyways, if he, if his board had decided to, had all of a sudden gone, "You know, he misled us," and got aggressive with him-

   10. KSKara Swisher2:19

       Mm-hmm.

   11. SGScott Galloway2:19

       ... I think this could've been a very d- different outcome for him. And instead-

   12. KSKara Swisher2:24

       Mm-hmm.

6. 2:24 – 2:59

   Can he buy it in bankruptcy? Judges, optics, and potential legal barriers

   1. SGScott Galloway2:24

      ... he's back and trying to buy, um, uh, uh, WeWork out of bankruptcy. I don't think the judge is gonna look kindly on him having taken-

   2. KSKara Swisher2:33

      Yeah.

   3. SGScott Galloway2:33

      ... so much money out and then showing up to buy the bo- I'd even think there's a law.

   4. KSKara Swisher2:37

      Yeah. He's (laughs) he's got it set though, doesn't he?

   5. SGScott Galloway2:39

      Oh, my gosh. And not only that-

   6. KSKara Swisher2:40

      Uh, have, have you spent time with him? He's very amusing. I had breakfast with him once, and he's super amusing, but-

   7. SGScott Galloway2:46

      No.

   8. KSKara Swisher2:46

      ... you know, I kept reaching for my wallet, and I wa- I was like, "Mm..."

   9. SGScott Galloway2:49

      No, I just heard-

   10. KSKara Swisher2:49

       He's very charming.

   11. SGScott Galloway2:50

       I heard from my-

   12. KSKara Swisher2:51

       Charming, charming.

   13. SGScott Galloway2:51

       I have a couple of friends at WeWork, and I heard from them in the morning. I put out that thing-

   14. KSKara Swisher2:57

       Hm.

   15. SGScott Galloway2:57

       ... and, and when the IPO unwound basically-

   16. KSKara Swisher2:59

       Yeah.

7. 2:59 – 3:58

   Investor reality check: Dan Loeb’s denial and why institutions will avoid him

   1. SGScott Galloway2:59

      ... saying, "Thanks. My kids can't go to school now." Um, but anyways, he's, um, i- i- the... When Dan Loeb comes out and says, "No," (laughs) , "Adam's exaggerating," that's a really b- bad look for Adam Neumann. And I would bet-

   2. KSKara Swisher3:15

      Yeah, yes.

   3. SGScott Galloway3:15

      ... Dan's gonna have nothing to do with this guy now. And-

   4. KSKara Swisher3:18

      No. Dan's a very canny investor.

   5. SGScott Galloway3:19

      Yeah, and I can't imagine any institution... Uh, when you're an institutional investor, you make a lot of money, um, uh, over the long term just by, by doing the following, not making stupid mistakes. And anyone who loses money with Adam Neumann right now will be accused of making a stupid mistake. And so-

   6. KSKara Swisher3:37

      Yeah.

   7. SGScott Galloway3:37

      ... I think it's gonna be just very difficult for him.

   8. KSKara Swisher3:38

      And he wouldn't lose money. What do you think of the actual thing? Let's leave aside that he-

   9. SGScott Galloway3:41

      WeWork?

   10. KSKara Swisher3:42

       ... flees, flees these people in some... You know, or no, he just got, took the money. He didn't fleece them. They knew, they knew just what he was doing.

   11. SGScott Galloway3:47

       Well, I don't... Okay, but, uh, I would be very interested... I believe that the board... I mean, that's what people say. People will say that Elizabeth Holmes lied to her board.

   12. KSKara Swisher3:58

       Mm-hmm.

8. 3:58 – 6:01

   The business case for WeWork post-Chapter 11: cherry-picking locations and fixing leases

   1. SGScott Galloway3:58

      And I, I would just love to know all the emails about what Adam Neumann was saying about performance at the company. Anyways, this'll all come out, I'm sure, at, um, at some point, but just to talk about WeWork for a second. Um, WeWork was invented for bankruptcy and for someone to make money here because in bankruptcy you get to go through their, whatever it is, 770 locations and cherry-pick the ones that are working and exit the leases of the ones that aren't and repackage the thing and pay the debtors some of their money back, issue new equity. WeWork, WeWork will live on. I believe that... I bet everyone from Barry Sternlicht to a variety of, um, real estate-savvy investors are looking at this thing because I called... When I, when I saw, I called a friend of mine who's a dis- distressed credit investor and said, "Could you look at the WeWork bonds and what it would cost to take over this company?" Because retail, and this is a retail concept, is invented or bankruptcy's invented for this, so this will... WeWork will, will live on to fight another day. So, get this, uh, the, the amount of global coworking space or the user base that uses coworking from '21, 2021 to 2024, is estimated to be up 100%.

   2. KSKara Swisher5:10

      I didn't know that.

   3. SGScott Galloway5:10

      The number of people using coworking space has doubled since, um, since the pandemic. It's a good business.

   4. KSKara Swisher5:18

      Mm-hmm.

   5. SGScott Galloway5:18

      This is a good business. It's had, uh, uh, it has, quite frankly, just had a terrible capital structure, and that just-

   6. KSKara Swisher5:24

      It just wasn't a tech company. It didn't need a wave company. You know, he bought all... He, he kind of lathered tech all over it.

   7. SGScott Galloway5:29

      That, that, that was just crazy. Crazy time is over. Sandeep came in. Sandeep is not crazy, but he had a bad capital structure. They just owed too much money.

   8. KSKara Swisher5:35

      Mm-hmm.

   9. SGScott Galloway5:36

      And leases, this is what kills retail companies. When you enter into a bad lease, they're 10-year leases, so that lease is costing you three million bucks a year, and you're making two million, it's a weeping sore of a liability that will cost you $10 million in losses over 10 years. But poof, under the auspices of Chapter 11 bankruptcy, which is a wonderful thing about America, you get to go through and cherry-pick all your leases-

   10. KSKara Swisher5:59

       Yeah.

   11. SGScott Galloway5:59

       ... and get out of the bad ones. WeWork-

   12. KSKara Swisher6:00

       Yeah.

9. 6:01 – 6:27

   “The third owner makes money”: why the next buyer could profit

   1. SGScott Galloway6:01

      ... you, uh... It's like hotels. They say the first person-

   2. KSKara Swisher6:03

      It's a good brand. It's a good brand.

   3. SGScott Galloway6:04

      They say it's the third person who owns a hotel that makes money. The first person comes in, buil- builds something beautiful and non-economic. Someone else comes in and takes it off them. They lose money, and then the third person who comes in and buys the hotel for 40 or 60 cents on the dollar makes money. We're at that third person right now.

   4. KSKara Swisher6:19

      Right. Yeah. Yeah. It's a good brand. Good luck, Adam. Good luck, Adam.

Episode duration: 6:27