While WeWork Grew lent Wall Street money and credibility

Banks jockeying for a role in WeWork's public debut wooed founder

Adam Neumann

with soaring valuations that would make him a billionaire many times over. Their loan to the company told a different story.


Wells Fargo

& Co. signing a $ 6 billion loan earlier this year, Neumann said: "If the biggest lender in this country can get comfortable with this, then everyone should."


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Nevertheless, Wells Fargo, the fourth largest US bank, only began lending to WeWork after a bank manager promised to follow Neumann, according to people familiar with the matter. [1[ads1]9659006] Banks had significant doubts about We Co., as WeWork superiors are known, even when they delivered the stock to investors, according to interviews and documents reviewed by The Wall Street Journal. After running out of cash, the company was rescued last month by the Japanese conglomerate

SoftBank Group Corp.

in a deal that ran Mr. Neumann.

WeWork's liquidation has hit the hardest wallets and the reputation of SoftBank and other venture capital investors that allowed Mr. Neumann and his company to grow. But with their money and reliability, Wall Street also fed the company's groundbreaking growth and image as a superhot technology company.

WeWork & # 39; s model – office space leasing, equipped it with details such as free beer and water with fruit and then subletting it – Required a constant supply of credit. Landlords required bank letters guaranteeing several months' rent in advance. These letters could be recycled when the short-term collateral expired.

JPMorgan was one of the largest lenders to WeWork and to Neumann, who considered CEO James Dimon and head of asset management

Mary Erdoes,

whose division had lent to Neumann, among his confidants.

In 2015, JPMorgan led a group of banks that provided a $ 650 million loan to WeWork. Two years later, the company returned for another $ 500 million, and Wells Fargo joined the group.

Wells Fargo bankers acknowledged internally that WeWork's business model was unprovoked, but agreed to lend $ 100 million if the company provided money as collateral, according to people familiar with the case and a note reviewed by Journal.

WeWork would be a profitable client in Silicon Valley, with Wells Fargo not having a strong presence, they argued in the memo. It could also give the bank a role in WeWork's IPO and future stock sales, which bankers estimated to be able to collect $ 12 million in fees, according to the internal memo if they were to approve the loan.

An internal committee initially rejected the loan, raising concerns about the company's outlook and Mr. Neumann's style, the people said. Roy March, chief of Wells Fargo's Eastdil real estate unit, assured executives that he was close to Neumann and would personally guide him, say people familiar with the situation.

Perry Pelos,

a top executive of Wells Fargo, eventually resigned after several appeals, the people said. Wells Fargo sold most of Eastdil this year.

This summer, as WeWork was preparing to go public, Mr. Neumann told friends that a new round of bank financing would "blow the market," according to a person familiar with the matter. He had met with Mr. Dimon and Goldman CEO

David Solomon,

people familiar with the conversations said.

Bankers in JPMorgan and Goldman meanwhile fought for roles in the company's stock exchange listing. They had told Mr. Neumann that it could be worth as much as $ 60 billion (JPMorgan) and $ 90 billion (Goldman), according to people familiar with the matter. Collecting a loan would help them win the assignment.

JPMorgan proposed a $ 6 billion loan that required WeWork to raise $ 3 billion in the stock market by the end of the year. The package included a $ 2 billion line of credit it could use to continue signing new space deals.

Here's a look at WeWork's business model. Photo: David & # 39; Dee & # 39; Delgado / Bloomberg

Goldman proposed $ 3.65 billion in loans, secured by income from WeWorks buildings, said people familiar with the matter. The deal would allow WeWork to borrow more if it hit certain milestones – up to $ 10 billion over time – and did not require the company to be made public, some of the people said. WeWork executives wanted more money upfront, they said.

JPMorgan won.

The bank pushed other lenders to commit at least $ 750 million apiece to the $ 6 billion total, and dangled a role in the IPO, according to people familiar with the negotiations. Some bankers worried JPMorgan's initial conditions were too lenient and demanded that WeWork put more money aside to support the loan, the people said.

Eventually, the $ 2 billion line was 100% collateral, meaning WeWork had to pledge a dollar of cash for every dollar it borrowed, the people said. Goldman, Wells Fargo and six other major banks agreed to participate.

Lenders would share about $ 250 million in upfront fees, according to people familiar with the deal, a high sum for a low risk settlement. A day after it closed, WeWork said it had chosen JPMorgan and Goldman to lead its IPO. The other banks were given junior roles.

The IPO got into trouble almost immediately after documents were submitted in August. Investors appreciated WeWork's growing losses and unusual financial arrangements between the company and Neumann. Bankers offered shares at a lower price; Investors are still not biting.

The company ousted Mr. Neumann as CEO and closed the stock exchange listing in September, which killed the loan agreement. WeWork, which suddenly became dangerous with little cash, found banks unwilling to resurface.

It returned to JPMorgan, seeking a $ 5 billion lifeline, said people familiar with the matter.

This time, the bank refused to lend its own money without measuring investor demand, said people familiar with the matter. Eventually it offered $ 5 billion.

WeWork took SoftBank's money instead.

Mr. Dimon defended the bank's dealings with WeWork in a TV interview this week.

"We helped WeWork come to a proper conclusion," Dimon said. "Now it has a chance to succeed."

Write to David Benoit at, Maureen Farrell at and Liz Hoffman at

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