CryptocurrencyInvestingBanksReal Estate

Inside JPMorgan, Moving On From WeWork is Proving to Be a Messy Proposition

October 13, 2019, 11:00 AM UTC

As bankers at JPMorgan Chase have knuckled down with WeWork’s top brass over financing that would provide the beleaguered office provider with much-needed liquidity in the wake of its derailed IPO, an unexpected presence has been involved in the talks.

As head of JPMorgan’s $2 trillion asset and wealth management division, Mary Callahan Erdoes doesn’t typically partake in corporate finance negotiations. But Erdoes has been a fixture when it comes to WeWork-related matters at the bank, according to sources with knowledge of the discussions—a testament to how deep ties have run between America’s largest financial institution and the coworking startup it backed to the tune of billions of dollars.

Erdoes’ involvement stems from JPMorgan’s significant personal banking ties with WeWork co-founder and former CEO Adam Neumann, sources said. Neumann may have stepped down as chief executive last month amid the fallout from the company’s floundering IPO, but he remains WeWork’s non-executive chairman and one of its largest shareholders—with much of his personal wealth tied directly to the company and its prospects.

That’s important to JPMorgan, because the bank’s interests in WeWork go beyond the billions of dollars in loans it’s provided the company in recent years, the attempted $3 billion IPO on which it served as lead underwriter, or the $6 billion in additional debt financing that it drew up for WeWork contingent on a successful public offering. (In lieu of the collapsed IPO, WeWork’s recent discussions with JPMorgan center around a new financing package reportedly worth up to $3 billion in debt—though such a deal is likely contingent on an influx of new equity capital from prolific backer SoftBank. Representatives for JPMorgan and WeWork declined to comment for this article.)

In looking to guide WeWork out of its current malaise, the bank is also accounting for its considerable relationship with Neumann on the personal wealth management side of its business. In addition to $97.5 million in loans, including mortgages, that it directly extended to Neumann, JPMorgan is among a consortium of banks that provided the WeWork co-founder with a $500 million line of credit. That credit is secured by Neumann’s shares in the company—which means that as WeWork goes, so does the value of the collateral against which Neumann personally borrowed half a billion dollars from JPMorgan, UBS and Credit Suisse.

In that sense, it’s understandable why Erdoes and her boss, JPMorgan CEO Jamie Dimon, have taken such an outsized interest in WeWork’s prospects. Both executives have been directly involved in the bank’s dealings with the coworking firm, as JPMorgan looks to salvage the myriad financial resources it’s poured into the company. Those include an equity ownership stake in WeWork; the company’s S-1 prospectus disclosed various JPMorgan entities as holding more than 18.5 million Class A shares in the firm, and Morgan Stanley analysts pegged the bank’s stake in WeWork at 4% in a recent note. (The analysts estimated that Goldman Sachs, which owns a 1.4% stake in WeWork, could take a $264 million writedown on its shares in the company—with JPMorgan likely avoiding such a hit thanks to its accounting of its investments.)

But perhaps above else, there are reputational factors to consider. WeWork’s public offering was meant to be the crowning achievement of a resurgent year for JPMorgan’s IPO advisory business, which has traditionally lagged behind its rivals at Goldman Sachs and Morgan Stanley. Instead, the bank has been scrutinized for letting the deal get as far as it did—with the wreckage of WeWork’s failed IPO joining disappointing offerings this year by Lyft and SmileDirectClub, both of which had JPMorgan as their lead underwriter.

For JPMorgan, it’s had the effect of raising the stakes as far as Saudi Aramco’s highly anticipated upcoming IPO is concerned. While the bank is among a cadre of Wall Street giants tapped to shepherd the state-owned oil producer’s massive public offering, internally, JPMorgan likes its chances of being anointed the lead underwriter on the deal—giving it a shot at redemption via potentially the largest IPO of all-time.

Of course, that’s much easier said than done. While Saudi Crown Prince Mohammed bin Salman is said to desire a headline-grabbing $2 trillion valuation for Aramco, that number could end up coming in at closer to $1.5 trillion, the Wall Street Journal reported Thursday. And there’s also the deal’s convoluted structure and regulatory challenges to account for; Aramco appears braced to initially list on Saudi Arabia’s domestic stock exchange before eventually tapping a major international exchange—though a listing in New York, for instance, could potentially fall afoul of U.S. securities regulations and questions about the company’s corporate governance.

As JPMorgan has found out firsthand this year, IPOs can be far from a straightforward proposition.

More must-read stories from Fortune:

Trump’s tax bill has cost homeowners a trillion dollars
—Why WeWork’s failed IPO might not mean disaster for SoftBank after all
A.I. remains a disruptive force in finance—even for fintechs
—The high price of signing up for retailer credit cards
—If you think there’s something strange about the 2019 IPO market—you’re right
Don’t miss the daily Term Sheet, Fortune’s newsletter on deals and dealmakers.