WeWork, the office-sharing startup that once soared to a $47 billion valuation, has filed for bankruptcy protection in the US. The company, which is backed by Japanese tech giant SoftBank, has been struggling with mounting debts, declining revenues, and the impact of the pandemic on its business model.
WeWork’s bankruptcy filing comes after a series of missteps that tarnished its reputation and led to the ouster of its charismatic co-founder and former CEO, Adam Neumann, in 2019. Neumann, who had a vision of creating a global community of entrepreneurs and innovators, was accused of mismanagement, self-dealing, and erratic behavior that undermined the company’s credibility and governance.
WeWork’s troubles worsened as the pandemic hit, forcing many of its customers to work from home and cancel their short-term leases. The company, which had more than 700 locations worldwide and about 730,000 members as of June, had to renegotiate its expensive and long-term contracts with landlords, cut costs, and lay off thousands of employees.
WeWork said that about 92% of its lenders had agreed to convert their secured debt into equity under a restructuring support agreement, wiping out about $3 billion of debt. SoftBank, which owns about 70% of WeWork and has invested billions of dollars in its turnaround, would retain an equity stake under the proposed restructuring, according to court documents.
The bankruptcy will affect the company’s business in the US and Canada, but not its locations outside of these countries or its franchisees around the world. The company said it expected to have the financial liquidity to continue business normally and that it was working to renegotiate leases with 400 landlords. It also said it intended to reject 69 leases of nonoperational locations.
WeWork’s bankruptcy court filings list assets of $15.06 billion and liabilities of $18.66 billion as of June 30. The company has not reported its financial results for the third quarter of 2023, but in the second quarter, it posted a net loss of $671 million on revenue of $593 million.
WeWork’s bankruptcy is a major blow for SoftBank, which has largely written down its investment in the company over the years. SoftBank said it believed WeWork’s restructuring support agreement was the appropriate action for the company to reorganize its business and emerge from Chapter 11 proceedings.
“WeWork has a unique opportunity to capitalize on the growing demand for flexible and hybrid work solutions, which has accelerated as a result of the pandemic,” SoftBank said in a statement. “SoftBank will continue to act in the best long-term interests of our investors.”
WeWork’s bankruptcy is also a cautionary tale for the startup industry, which has seen many companies chase growth at the expense of profitability and sustainability. WeWork, which was once seen as the future of the office sector, now faces an uncertain future as it tries to reinvent itself and regain the trust of its customers, landlords, and investors.
However, some analysts and experts believe that WeWork still has a chance to survive and thrive in the post-pandemic world, where more people and companies are looking for flexible and collaborative workspaces. WeWork’s new CEO, David Tolley, who has experience in leading a debt-stricken satellite communications provider out of bankruptcy, said he was confident that the company could emerge successfully from the restructuring process.
“We have a clear path forward to execute on our strategic plan and position WeWork for long-term growth and profitability,” Tolley said in a statement. “We are grateful for the support of our members, employees, landlords, and financial stakeholders as we work together to strengthen our capital structure and expedite this process through the restructuring support agreement.”
Source: Reuters
