Jose Sarmento Matos/Bloomberg/Getty Images
Visitors in front of a WeWork coworking office in London on August 9, 2023.
New York CNN –
WeWork, the struggling coworking space company, has filed for bankruptcy, marking a dramatic decline for what was once the world’s most valuable startup.
The Chapter 11 bankruptcy announcement was widely expected after the company said last month that it was struggling to repay its debts. The pandemic rocked WeWork as people began working from home instead of commuting to office spaces. The company’s shares lost more than 99% of their value and the SoftBank-backed company, which was privately valued at about $47 billion at its peak, was worth $45 million as of Monday before its bankruptcy filing.
WeWork said it will remain open and operational while it renegotiates its leases and debt obligations. The company said late Monday that investors holding 92% of the company’s secured debt have agreed to adjust the terms of their loans to help the company stay in business.
“Now is the time for us to move forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” WeWork CEO David Tolley said in a press release. “We remain committed to investing in our products, services and world-class team of employees to support our community.”
Once a much-heralded tech unicorn that promised to revolutionize the future of office work – including through free-flowing craft beer – a perfect storm of factors led to WeWork gradually failing after a botched attempt to abandon it publicly back in 2019.
At the time, IPO documents revealed unexpectedly large losses and potential conflicts of interest with the company’s co-founder and then-CEO, Adam Neumann. Neumann, whose unorthodox leadership style led to WeWork culture becoming the subject of much news coverage, was ousted in 2019 amid pressure from investors. (It is worth noting that Neumann received a stunning golden parachute upon his departure).
About two years later, WeWork finally went public with a significantly reduced valuation of around $9 billion. But in 2021, market sentiment and the easy access to capital that underpinned much of the startup world before the pandemic began to change. Although WeWork described itself as a technology company, some critics noted that its core business was not in technology but actually in real estate, that is, leasing space in office buildings for retrofitting and subleasing to startups, freelancers, and large and small companies Company.
Even after going public, the company struggled to turn things around. The flexible workspace provider has faced a difficult time in the commercial real estate sector after the pandemic led to a surge in hybrid and work-from-home options – threatening the office culture on which WeWork was built. Meanwhile, increasing competition in the coworking space, higher interest rates and macroeconomic uncertainty are also clouding WeWork’s attempts at self-rescue in recent years.
In 2023 alone, WeWork shares have plummeted by around 98%. In May, WeWork announced a leadership change with the departure of its chairman and CEO Sandeep Mathrani, a real estate executive who investors hoped would save the company. David Tolley, a WeWork board member, stepped in as interim chief executive and was officially named CEO in October. Meanwhile, in August, the company said it had “significant doubts” about its ability to remain in business next year as losses and debt continued to mount.