WeWork filed for BANKRUPTCY as troubled company succumbs to bad market11/07/2023
WeWork files for BANKRUPTCY as co-working group succumbs to empty office space that decimated the company once worth $47billion
- The predicted filing arrived Monday in federal court in New Jersey
- The bankruptcy will apply to the company’s US and Canada locations
- WeWork has been careening toward failure since its failed 2019 IPO attempted, which followed a $47billion valuation
One-time unicorn startup WeWork filed for Chapter 11 bankruptcy protection in New Jersey federal court on Monday.
The filing, which was expected, is limited to the office-sharing company’s US and Canada locations – according to regulatory filings, WeWork has 777 locations across the globe.
According to the filing, the company reported liabilities ranging from $10billion to $50billion.
WeWork CEO David Tolley, who assumed the role after the previous CEO resigned in May, said: ‘I am deeply grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and expedite this process through the Restructuring Support Agreement.’
‘We remain committed to investing in our products, services, and world-class team of employees to support our community.’
The office-space sharing company suffered a spectacular public collapse after being valued at $47billion in 2019 and then failing to go public.
WeWork filed for Chapter 11 bankruptcy protection on Monday, in an expected move. The office-space sharing company has 777 locations across the globe
The COVID-19 pandemic wrought further havoc on the company as remote work and abrupt lease terminations tanked the value of office space.
In August, the company disclosed that bankruptcy could be a concern.
Problems first started for the New York-based company, which was founded in 2010, when it sought to go public in 2019.
In August of that year, the firm, which rents out co-working spaces to freelancers, start-ups and established companies, published its full financials – revealing a $900 million loss in six months.
The IPO failed after investors raised concerns over its business model and governance under founder and then-CEO Adam Neumann – and the company suffered a spectacular collapse, seeing its valuation plummet to less than $10 billion.
Neumann fell from grace and was eventually ousted amid claims of a toxic environment at WeWork.
Despite the company’s utopian image, employees later characterized it as having a ‘cult-like’ environment, and called Neumann the ‘partyer in chief’ while describing his ‘tequila-fueled leadership style,’ which included smoking marijuana on private jets.
In one alleged incident of excess, Neumann threw a three day party for 8,000 employees to celebrate the company’s massive valuation.
In his book Billion Dollar Loser: The Epic Rise and Fall of WeWork, Reeves Wiedeman wrote that Neumann demanded that cases of Don Julio 1942 tequila were at every office and would ‘lose his s***’ if they were not there.
The New York-based workspace-sharing firm rents out co-working spaces to freelancers, start-ups and established companies
Founder Adam Neumann was forced to step down as CEO following a failed IPO in 2019
Despite poor wages at WeWork angering staff, Neumann bragged about how little he paid his staff and insisted there they were supposed to use a ‘sense of purpose’ and free beer to pay their bills, the book said.
In 2020, it was reported that the company paid off a female whistleblower with more that $2million in cash to stay quiet after she threatened to expose an alleged culture of drug-taking, sleeping with colleagues and discrimination at the company, and claimed that she was a victim of a sex assault.
On Monday, Neumann told CNBC he was disappointed by the filing:
‘It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before.’
‘I believe that, with the right strategy and team, a reorganization will enable WeWork to emerge successfully.’
The company eventually went public in October 2021, through a merger with a special purpose acquisition company, but the turbulence continued and it eventually lost 98 percent of its value.
The company told regulators on August 8 that macroeconomic conditions have further weakened demand for its shared office spaces, and it has suffered from high member turnover rates.
WeWork has 512,000 members at its workspaces across 33 countries – and there are currently 32 co-working locations across the US, according to the company’s website.
WeWork’s interim CEO, David Tolley, took over in May 2023
But office vacancies in the United States have exceeded 20 percent early this year, according to real estate services company JLL.
Columbia University researchers also found a 45 percent drop in office values in 2020, with little recovery projected in the years to come.
In May, CEO Sandeep Mathrani stepped down and board member David Tolley took over as interim CEO.
Three board members resigned in the first week of August because of ‘a material disagreement regarding Board governance and the Company’s strategic and tactical direction.’
The company struck deals in March to cut its debt by about $1.5 billion and extend the date of some maturities to preserve cash.
The bankrupt firm has engaged Kirkland & Ellis and Cole Schotz as legal advisors. CNBC reports that PJT Partners will serve as its investment bank, with support from C Street Advisory Group and Alvarez & Marsal.
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