WeWork Squandered Past Rescue Offers

What’s going on:      

WeWork’s steep downward spiral has continued as the share price is now below 20 cents, and reports from the New York Times and Business Insider indicate that the company may have squandered previously offered rescue options, leaving bankruptcy as one of the only choices left.  

WeWork’s share price dropped 13% in one day last week, following news that large shareholders were planning to sell a combined 90.8 million shares.  

News of the company’s latest stock market plummet came after the company’s former CEO Sandeep Mathrani and former CFO Andre Fernandez announced they were leaving the company. Before he left, Mathrani reportedly approached WeWork’s largest shareholder Softbank with offers from companies interested in operating WeWork’s coworking spaces. This included offers from real-estate broker JLL, and coworking giant IWG. Softbank declined.  

Adam Neumann, who was ousted as WeWork’s CEO in 2019, also approached Mathrani before he left the company to discuss a potential investment of up to $1 billion and a debt buyback. However, these negotiations did not come to fruition, according to the New York Times. Mathrani decided to pursue debt restructuring as an alternative course of action. 

Why it matters:     

If WeWork files for bankruptcy, it would lead to a dramatic shake-up in the co-working industry, with smaller competitors potentially gaining a large boost in both influence and market share. However, the struggles faced by WeWork might be more indicative of the broader challenges in the commercial office space industry, as more businesses are giving up physical spaces due to remote and hybrid work arrangements. This shift has led to increased delinquencies for office debt and signs of distress are reported even in prime downtown properties in cities like New York City and Los Angles.  

How it’ll impact the future:        

WeWork’s performance influences other key leaders in the coworking industry. The company helped popularize shared coworking spaces in 2010 and remains as one of the largest coworking firms worldwide. Further consolidation, or even bankruptcy, could affect the availability and affordability of flexible workspaces for businesses and remote and hybrid workers in cities where the company has a presence.  

WeWork rents nearly 20 million square feet of office space, which according to The New York Times is more than any other company in the U.S. If WeWork collapses, already weak commerical real estate sectors will be hit hard.