WeWork, the real estate company that provided startups and individuals with elegant spaces to realize their entrepreneurial dreams, filed for bankruptcy protection in the United States on Monday after years of struggling to gain traction.
The company filed for Chapter 11 bankruptcy protection in New Jersey as part of what it called a “comprehensive restructuring” of its business.
The company said creditors holding 92 percent of its secured debt had agreed to a restructuring plan that would see it reduce its office rental portfolio.
“As part of today’s filing, WeWork is requesting the ability to decline leases for certain locations that are largely non-operational, and advance notice has been provided to all affected members,” the company said in a statement. In its filings, it reported debts of more than $18 billion.
In September, WeWork announced it would begin renegotiating all leases and abandon certain locations. On its website, the company lists 660 locations in 37 countries, compared to the 764 locations in 38 countries it had about two years earlier. The company leased nearly 20 million square feet of office space in June, more than any other company in the United States. Monday’s actions will not impact WeWork franchises outside the U.S. and Canada, the company said.
WeWork’s demise is a blow to landlords who have rented much of their space to the company. Many landlords have accepted lower rents from WeWork in recent years, and some are struggling to pay off debts associated with their buildings. Since the pandemic, fewer employees have been going to the office, creating one of the worst commercial real estate crises in decades.
WeWork has been sending distress signals for months. In March, the company agreed with a major investor, Japanese technology group SoftBank, and others to significantly reduce its debt and secure new financing. Still, it said in August there were “significant doubts” about the company’s ability to stay in business. And last month, WeWork said it would miss a total of $95 million in interest payments – a move intended to help the company negotiate with its lenders as it sought to cut costs with its landlords. After a 30-day grace period, the company agreed with creditors on a seven-day deferment that expires on Tuesday.
Shares of WeWork have fallen more than 98 percent since the beginning of the year, and the company’s value was less than $45 million as of Friday. At its peak in January 2019, the company was worth around $47 billion.
The financial challenges include cutting back on a startup that once wanted to “raise the world’s consciousness.” WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey and opened its first location in Lower Manhattan in 2011. The focus was on leasing rather than purchasing office space and parceling it out to customers, including freelancers, small businesses and larger corporations.
The company expanded rapidly in the 2010s, opening locations in San Francisco, Los Angeles, Seattle, Tel Aviv and London.
The spending was largely funded by SoftBank, which bet that generous spending by startups would allow the companies to grow faster than their competitors and gain dominant positions in their industries. SoftBank has invested more than $10 billion in WeWork.
The company became synonymous with co-working, a trend embraced by millennials who worked freelance or were immersed in startup culture. Employees typed on their laptops in open workspaces or took refuge in glass conference rooms to attend meetings. They were places where people could chat and share ideas while enjoying the cold brew and kombucha on tap.
In August 2019, WeWork sought to go public. It was the largest private tenant in Manhattan and one of the most valuable startups at a time when Silicon Valley investors were pouring fantastic sums into young companies.
But as Wall Street learned more about the company’s governance problems and its huge losses, the IPO was put on hold the following month. Mr. Neumann resigned as CEO shortly afterwards. Because the IPO failed, the company ran out of money and needed a bailout. In October 2019, SoftBank provided a lifeline that valued the company at $7 billion.
Sandeep Mathrani, an executive whose career worked at real estate firms, became WeWork’s chief executive in February 2020. Then came the pandemic, which forced many professionals to work from home, compounding WeWork’s problems.
Under Mr. Mathrani, WeWork went public in October 2021 through a merger with a special purpose acquisition company. The closure of locations and the renegotiation of rental agreements with landlords also began. Mr. Mathrani led a restructuring this spring that reduced the company’s debt. In May, shortly after the restructuring, Mr. Mathrani left the company after reportedly becoming increasingly frustrated with SoftBank.
Last month, WeWork announced a new CEO, David Tolley, who had previously filled the position on an interim basis. “WeWork has a strong foundation, a dynamic business and a bright future,” Mr. Tolley said in a statement on Monday.