WeWork, one a venture capital success story valued at up to $47 billion, has officially filed for chapter 11 bankruptcy in the US with a similar filing to follow in Canada. The firm has announced the dramatic restructuring move having seen its market cap drop to below $50 million recently.
In a statement, the beleaguered co-working company insists that “global operations are expected to continue as usual” and that its co-working spaces “remain open and operational.” It adds that WeWork's international franchises will not be affected by the proceedings.
In October it appointed a new CEO, David Tolley, in an attempt to rebuild for a post-pandemic world where trends like fully remote jobs and the 4-day workweek have fundamentally changed how (and where) we work.
WeWork Feels Weight of Property Footprint
Last week, WeWork let the US financial regulator know it had agreed with creditors to temporarily postpone payments for some of its debt. A day later, its shares fell by more than 40% during after-hours trading.
Concerns about WeWork’s debts, losses, and management, have plagued the company for some time now, leading to difficulty in it selling shares on the stock market back in 2019. This comes despite tens of billions of dollars being pumped into the company from Japanese conglomerate, SoftBank.
As of June, the company’s net long-term debt had risen to $2.9 billion. It's further weighed down by than $13 billion in long-term leases, something which filing for bankruptcy will allow it to request the option of rejecting.
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However, trouble for the firm properly came to light back in August this year, when it raised “substantial doubt” that it could continue operations. A decrease in demand – likely a hangover from 2020’s work-from-home orders – alongside a “difficult” operating environment were behind this.
Revolving Door of Top WeWork Execs
The exit of several top executives this year has understandably contributed to instability across the firm and many insiders say the onetime co-working giant has never really recovered from the departure of charismatic but controversial co-founder Adam Neumann.
Neumann stepped down as CEO in 2019 after scrutiny of his leadership had “become a significant distraction” for the company and its plans for an IPO.
Since then, Chairman Sandeep Mathrani – who led the company as Chief Executive during the pandemic – left back in May. During his tenure he had eliminated $2.3 billion in costs and over $1 billion in debt.
WeWork's Cautionary IPO Tale
Some are attributing the remarkable reversal of fortune to WeWork’s 2019 plans to go public. Despite investors’ skepticism of taking long-term leases and renting them for a short-term time period, the company pressed on after the aforementioned saga surrounding Neumann's departure.
Following the pandemic, it did manage to go public in 2021 but at a significantly reduced valuation. By the end of June, the firm reported having 777 locations in 39 countries through franchising agreements.
WeWork's full official statement on its bankruptcy can be found in its Newsroom.