WeWork files for bankruptcy
The struggling coworking firm WeWork has filed for bankruptcy in a federal court. The declaration of Chapter 11 bankruptcy completes a startling collapse for the once-soaring, SoftBank-backed company, which peaked at a private valuation of almost $47 billion.
WeWork CEO David Tolley stated in a press statement that "now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet." "To support our community, we are steadfastly dedicated to investing in our world-class team of employees, products, and services."
WeWork was once a highly anticipated tech unicorn that promised to transform office work in the future by offering free craft beer, among other things. However, a series of unfortunate events led to WeWork's collapse, including a disastrous attempt to go public in 2019.
Larger-than-expected losses and possible conflicts of interest with the company's cofounder and then-CEO, Adam Neumann, were disclosed in the IPO paperwork at the time. Under pressure from investors, Neumann was fired in 2019 after his unconventional management style made WeWork's culture the focus of extensive media coverage. Remarkably, Neumann was still given an incredibly beautiful golden parachute when he left.
After almost two years, WeWork went public at a significantly lower valuation of about $9 billion. However, by 2021, investor opinion had begun to change, as had the easy access to finance that had supported a large portion of the startup scene prior to the epidemic. Despite marketing itself as a software company, WeWork's primary business, according to some detractors, is actually in real estate; it rents out office space in office buildings to startups, independent contractors, and businesses of all sizes.
The corporation has failed to turn things around, even after becoming public. The epidemic threatened the entire office ethos WeWork was founded upon, and as a result, the flexible workspace provider found itself in a challenging situation within the commercial real estate market. WeWork's efforts to salvage itself over the previous three years have been clouded by rising interest rates, heightened competition in the coworking industry, and macroeconomic instability.
WeWork's stock has dropped by around 98% only in 2023. WeWork announced in May that its CEO and chairman, Sandeep Mathrani, had left the company. Investors had hoped that Mathrani's experience in real estate would help the company turn a profit. WeWork board member David Tolley took over as acting CEO in October after serving as acting CEO for a while. Meanwhile, as losses and debt continued to rise, the company stated in August that it had "substantial doubt" about its capacity to continue operating during the ensuing year.