WeWork nears bankruptcy filing after years of turmoil
NEW YORK, UNITED STATES — WeWork, once valued at $47 billion, is preparing to file for bankruptcy as early as this week, according to sources cited by the Wall Street Journal and Reuters.
The flexible workspace provider has struggled financially for years after a failed IPO attempt in 2019 revealed billions in losses and questionable leadership under founder Adam Neumann.
WeWork plans to file for Chapter 11 protection in New Jersey as it continues discussions with creditors to restructure its heavy debt load. The company has over $13 billion in long-term lease obligations and warned investors in August it may not have sufficient liquidity to keep operating.
The potential bankruptcy caps a turbulent period for the company after its valuation plummeted from $47 billion to $3 billion in 2019. SoftBank, its largest investor, took an 80% stake in WeWork after providing billions in financing to keep it afloat.
WeWork has faced additional challenges during the pandemic as demand for office space declined. It has continued losing money, with revenues dropping to $2.6 billion in 2021. The company recently missed bond interest payments, a sign of its ongoing cash crunch.
In August, WeWork cast “substantial doubt” about its ongoing viability, leading to a series of high-profile executive departures, including CEO Sandeep Mathrani. That same month the New York Stock Exchange (NYSE) suspended trading in WeWork’s warrants due to “abnormally low” trading price levels.
WeWork’s market cap now stands at $44 million.
According to tech investor Greg Isenberg, WeWork expanded too fast by taking on long-term leases and was overvalued as a tech company despite having a real estate company’s balance sheet. While WeWork helped revolutionize the office rental industry, its business model proved unsustainable.
WeWork currently has over 700 locations globally and 40,000 employees. However, its membership numbers have declined 15% from their peak.
While other flexible office space providers have rebounded post-pandemic, WeWork has lagged as it continues working through its substantial debts. The impending bankruptcy filing could help WeWork restructure its finances, but it is a dramatic turn for a company once seen as a shining unicorn.
