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- WeWork Inc., previously a coworking industry titan, has filed for bankruptcy following a long string of financial struggles.
- The company’s stock fell an astonishing 98 percent in 2023, requiring a reverse stock-split to retain NYSE listing as it had dipped well below $1.00 for an extended period.
- The bankruptcy of WeWork, a darling in shared coworking spaces since 2010, could raise concerns about the future of the coworking industry, despite the fact that the sector is growing.
In a breaking development that will send shockwaves through the coworking industry, WeWork Inc. filed for Chapter 11 bankruptcy protection in the U.S. on Monday.
The bankruptcy documents, filed in New Jersey, note more than $18 billion in debt. The company reports that creditors holding 92 percent of its debt are onboard with the restructuring plan.
In WeWork’s statement on the filing, WeWork Chief Executive David Tolley said, in part, “WeWork has a deliberate and value maximizing lease rejection plan that is expected to position the company for operational and financial success. WeWork is requesting the ability to reject the leases of certain locations, which are largely non-operational and all affected members have received advanced notice.”
The bankruptcy filing was not unexpected, especially as trading of shares were halted pending news early Monday morning. It comes after a series of financial struggles, lawsuits, and leadership changes that have plagued the company for years and became dire this year. Its recent maneuvers to renegotiate leases, salvage its stock and lessen debt with restructuring were ultimately unsuccessful. Last month, the company intentionally missed paying $95 million in interest payments, then negotiated an additional seven-day forbearance with creditors, which expires Tuesday.
WeWork’s journey has been marked by a series of missteps and missed opportunities. The company’s former CEO, Sandeep Mathrani, and CFO, Andre Fernandez, left the company amidst its declining stock market performance earlier this year.
Prior to their departure, they had reportedly approached Softbank (WeWork’s largest shareholder) with offers from companies interested in operating WeWork’s coworking spaces. These offers, including those from real estate broker JLL and coworking giant IWG, were declined by Softbank.
Adam Neumann, the charismatic founder who was ousted as WeWork’s CEO in 2019, also attempted to negotiate a potential investment of up to $1 billion and a debt buyback with Mathrani this year. However, these negotiations did not materialize, leading Mathrani to pursue debt restructuring as an alternative course of action.
Despite restructuring its debt by $1.5 billion and extending maturities with the help of its main creditors and SoftBank, WeWork’s financial stability continued to falter. The company’s share value experienced an astounding drop with a net loss of $700 million in the first half of 2023, with its stock trading as low as $.13 at one point. WeWork closed Friday at about $.84 after shares fell 66% last week, according to Bloomberg.
Since the start of the year, WeWork’s stock has fallen more than 98 percent, crashing to a less than $45 million valuation as of Friday, The New York Times reports. The company was worth an unbelievable $47 billion at its peak in 2019.
WeWork, a pioneer in shared coworking spaces since 2010, has significantly influenced the coworking industry’s landscape. The bankruptcy filing could raise concerns about the future of the coworking industry, despite the fact that the sector is growing. IWG reported that WeWork’s struggles were already impacting its stock value pre-bankruptcy filing, even though the competing coworking company posted record profits.
WeWork has said that the Chapter 11 filing will not impact WeWork locations or franchises outside the U.S. and Canada. However, the bankruptcy will lead to a dramatic shake-up in the coworking industry globally, most likely boosting smaller competitors’ influence and market share.
While they may not be reflective of the coworking industry’s stability, WeWork’s struggles do reflect broader challenges in the commercial office space industry. The shift towards remote and hybrid work arrangements has led to an increase in office debt delinquencies, and skyrocketing office vacancies, with signs of distress reported even in prime downtown properties in cities like New York City and Los Angeles.
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WeWork’s bankruptcy could also impact the availability and affordability of flexible workspaces for businesses and remote and hybrid workers, particularly in cities where the company has a significant presence. WeWork rents nearly 20 million square feet of office space, more than any other company in the U.S., according to The New York Times. Its collapse will further weaken the already struggling commercial real estate sectors, particularly in New York City.
The future of WeWork remains uncertain — it could still be rescued by a strong group of investors — but its bankruptcy filing underscores the need for truly sustainable business models in the coworking industry. As the industry navigates this transformative period, it will be crucial to learn from WeWork’s missteps and adapt to the evolving demands of the future of work.
