Founder's riches grow as WeWork goes bankrupt: Here's how
WeWork, the co-working giant that once boasted a net worth of nearly $50 billion, filed for Chapter 11 bankruptcy in New Jersey on November 6. In a dramatic turn of events, the company's value has plummeted, with its stock price tanking by 99.8% since its ill-fated initial public offering (IPO). Interestingly, its co-founder, Adam Neumann's fortune has grown substantially despite WeWork's troubles. Here's how.
WeWork's downfall
WeWork's reversal of fortune can be attributed to several factors, including a botched IPO attempt, widespread criticism of founder Neumann's management style, and challenges posed by the COVID-19 pandemic to its co-working business model. These combined to erode the company's value, leading to its bankruptcy filing.
Neumann's surprising financial gain
While WeWork crumbled, Neumann managed to secure his financial future. Notably, Neumann's wealth increased even as WeWork's woes multiplied. A significant portion of his gains came from the Special Purpose Acquisition Company (SPAC) process. According to reports, SoftBank paid Neumann a substantial sum during this process. In 2021, Neumann received a reported $480 million for half of his remaining stake in WeWork.
Neumann's $770 million payout
Initially, SoftBank had attempted to back out of purchasing Neumann's full stake, which was valued at $1 billion, resulting in a legal dispute. In addition to the $480 million, Neumann also received $185 million as part of a non-compete agreement and a further $106 million as part of a settlement. This brought his total cash windfall from the 2021 SPAC process to around $770 million.
Amid WeWork's decline, Neumann started 'Flow'
In the midst of WeWork's troubles, Neumann started "Flow," a real estate tech company now worth $1 billion, thanks to a $350 million investment from venture capital firm Andreessen Horowitz. Flow's goal is to tackle rental housing disparities by fostering community among renters and helping them build equity in their homes. They have acquired 3,000 units in major cities and take a tech-driven approach, drawing from Neumann's WeWork experience, and are considering expanding into financial services.
WeWork India is unaffected by global bankruptcy filing
Meanwhile, WeWork India made it clear that its operations are independent of WeWork Global, and the recent bankruptcy filing in the United States won't impact its stakeholders in India. Despite WeWork's global presence in 777 locations across 39 countries, it has struggled to achieve profitability. In contrast, WeWork India has been in the black since 2021, thanks in part to the unwavering support of its majority shareholder, Embassy Group, which remains committed to investing in the company's ongoing success.
