Propmodo Daily

By Franco Faraudo · Mar. 27, 2024

Greetings!

Adam Neumann has made an offer to buy back his former company, WeWork. Details of the offer remain unclear, but his new venture, Flow, could pay between $500 and $900 million. Today, we examine the details to assess if WeWork is worth Neumann's potential investment.

Plus, ADUs are transforming multifamily housing, offering a glimmer of hope amidst the housing crisis. Industry leaders like AvalonBay are embracing this trend, but can it really change the landscape? And how are local governments easing the way for innovative ADU adoption?

Also, this week on Propmodo Technology we're exploring circadian lighting, designed to boost wellness in the workplace by mimicking natural light patterns. Plus, learn how networked LED systems can save energy and create better work environments.

Now, let's dig in!

Is WeWork Worth $500 Million?

Co-working's prodigal son returns. Adam Neumann's new company, Flow, has reportedly made an unsolicited $500 million bid to buy WeWork. Rumors suggest the bid could reach as high as $900 million, contingent on WeWork's financial state following bankruptcy.

While unsolicited, the offer isn't entirely surprising. In February, Flow's lawyers expressed dismay to WeWork advisors (and the press) regarding WeWork's lack of engagement in providing information for a potentially value-maximizing transaction.

Neumann's motivations in reacquiring WeWork are clear. He witnessed his once-globally-renowned startup plummet into bankruptcy. Though details about Flow remain scarce, Neumann has hinted at a co-working element, making WeWork a natural fit. While a fraction of WeWork's peak $46 billion valuation, Neumann's bid arrives as the company remains embroiled in bankruptcy-related legal battles.

WeWork's stock currently values the company at a mere $19 million. While the company and brand are worth more, the question is: how much more? Competitor Regus offers a useful benchmark. With 4,000 global locations, Regus is valued at approximately $1.98 billion, suggesting a per-location worth of $490,000. This aligns with typical small business valuations of three to four times EBITDA, reflecting potential profits for individual co-working spaces.

WeWork lists 609 locations, reduced from 2022's peak of 777. But, 131 locations in India and China are now independent entities. If we value the remaining 478 locations at $490,000 each, WeWork's estimated worth is roughly $235 million.

The WeWork brand undeniably holds value – it was once synonymous with co-working, similar to Kleenex and facial tissues. Plus, their highly-rated app (4.8 stars, 7,400+ ratings) and enterprise-focused workplace solutions app represent valuable intellectual property with growth potential.

But WeWork is still losing a lot of money. Its new restructuring plan eliminates $7.5 billion in rent liability, but that might be wishful thinking. Nine landlords have refused to negotiate with WeWork on lease restructuring, taking issue with a pre-bankruptcy move orchestrated by SoftBank and others. This move created $2 billion in secured claims, leaving insecure leases with minimal chance of settlement recovery.

With these factors in play, WeWork's true market value may be irrelevant. This offer's timing and approach raise questions about its sincerity. Why would a buyer make an offer without even engaging with the leadership team? The offer might be a strategic maneuver to influence negotiations and force a repayment option for the disgruntled landlords. If successful, Flow could pressure a sale, potentially acquiring the company at a discount.

Even if $500 million is a steal for the world's most famous co-working brand, the buyer faces a mountain of work. They'll need to straighten out the company's finances and repair relationships with landlords to ensure long-term success.

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