JPMorgan's Jamie Dimon and Adam Neumann met this weekend to hash out how to get WeWork's IPO back on track
- JPMorgan CEO Jamie Dimon and embattled WeWork CEO Adam Neumann met over the weekend to talk about how to get the company's delayed IPO back on track, sources told Business Insider.
- One of WeWork's challenges is $6 billion in financing tied to the success of an IPO that JPMorgan is leading, one of the people said.
- WeWork's board is considering ousting Neumann as soon as this week, according to media reports, because of questions around his use of company money and whether he used drugs on the job.
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JPMorgan CEO Jamie Dimon and embattled WeWork CEO Adam Neumann met this weekend to talk about how to get the coworking company's initial public offering back on track, according to people with knowledge of the matter.
Dimon and Neumann met on Sunday afternoon in New York to discuss the delayed IPO, the people said. It was not clear exactly what topics were discussed or how long the meeting lasted, the people said.
One of WeWork's challenges is $6 billion in financing tied to the success of an IPO that JPMorgan is leading, one of the people said. The financing offer is good until Dec. 31. If WeWork hasn't gone public by then, the terms will expire and the real-estate company will be forced to negotiate new terms, one of the people said.
Spokespeople from both JPMorgan and WeWork declined to comment. A representative of Softbank, WeWork's largest shareholder, also declined to comment.
Dimon has had a busy few weeks when it comes to struggling IPOs. SmileDirectClub stumbled so badly in its first day of trading earlier this month that its CEO, David Katzman, held a call with the JPMorgan CEO to figure out exactly what happened, sources told Business Insider.
Money-losing WeWork in recent weeks had mulled the drastic step of slashing its IPO valuation to as low as $10 billion, down from $47 billion in its last SoftBank-rolled funding round, in order to drum up investor interest, according to media reports. Now the coworking company has put its IPO plans on ice and pressure is mounting on Neumann, who has drawn criticism for his financial ties to and behavior while running the company he co-founded.
According to the latest media reports, big WeWork investors and board members are considering an ouster as soon as this week, though that process would be complicated by the fact that Neumann holds the majority of voting power at the company.
JPMorgan has good reason to see a successful WeWork IPO. Besides serving as the lead underwriter and taking part in the financing agreement tied to the IPO, JPMorgan is among banks that have made personal loans to Neumann, some of which are backed by WeWork shares. It has also played a part in WeWork's early fundraising - JPMorgan funds made up the third-largest non-We-management-related investor, with 18.5 million shares, according to WeWork's August S-1 filing.
Under current terms, banks including JPMorgan, Goldman Sachs and other underwriters in the planned IPO have agreed to provide senior secured financing of up to $6 billion to WeWork, contingent on the company raising at least $3 billion, according to WeWork's S-1 filing.
Neumann himself also has a WeWork share-backed line of credit of up to $500 million from JPMorgan, Credit Suisse and UBS, with around $380 million principal outstanding as of July. He's also borrowed another $97.5 million from JPMorgan for things like mortgages secured by personal property, but not by any shares.
It wasn't always clear that JPMorgan would have such an active role in the IPO or the attached financing. In July, the Wall Street Journal reported that Goldman Sachs was leading a possible financing package that would have been independent of the IPO. It's not clear why or when the financing package changed from Goldman's structure to JPMorgan's.
Some think it was unwise to link the debt to the IPO both because it telegraphs the company's cash needs to the market and sets up a situation where a cash crunch means the company may be rushed into doing an IPO.
This all comes at a crucial time for WeWork to plan for its future. Nine-year-old WeWork's average revenue per members has declined, and it said that is expected to keep falling as it grows overseas. The company said in the August filing that the timing of any future profitability depends on "levers" it has control over - most of which involve slowing down its expansion.