A startup once valued at $47 billion has plunged to a new low with the speed of a meteor burning up in Earth’s atmosphere.
WeWork, formed in 2010 and tailored to "revolutionize working space," filed for US bankruptcy protection at a federal court in New Jersey on November 6.
All that the once buoyant and ambitious New York-based company has today is assets worth some $15 billion overshadowed by over $18 billion in debt, and weighed down by some $100 million in unpaid rent, as per the listing.
"As part of today's filing, 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," WeWork Chief Executive David Tolley said in a statement.
Currently, the office-space leasing company is valued at $44 million, with its stock down a mind-boggling 99.2 percent from the start of the year.
Profitability, or rather lack therof, has plagued the company that Japanese technology group SoftBank owns about 60 percent of. Its survival appears to hinge on renegotiation of pricey leases via bankruptcy. Some 74 percent of WeWork’s revenue in the second quarter of this year was swallowed up by cost of space, claim media reports.
A sign for WeWork is displayed at the workspace-sharing office in the borough of Manhattan in New York, Aug. 9, 2023.
© AP Photo / Ted Shaffrey
But back in its zenith, after being founded by Adam Neumann, WeWork basked in the glory of being one of the most valuable US startups, having no difficulty attracting a stream of investments from companies like the afore-mentioned SoftBank, and even major Wall Street Banks like JPMorgan Chase. Back then, taking advantage of the repercussions of the 2008 recession, building leases were snatched up by the company at affordable value, with lump sums funneled towards selling trendy office space coveted by millennial entrepreneurs.
But after the $47 billion valuation in the summer of 2019 came a rude awakening. Some argue it was Neumann’s frenetic quest for growth, a faulty business model, coupled with reported financial discrepancies, among other things, that led to the failed initial public offering (IPO) in 2019.
Neumann stepped down, but the company, despite hemorrhaging major funders, dodged bankruptcy back then. Not only the failed IPO, but also the COIVID-19 pandemic with its “work from home” culture resulted in rounds of painful layoffs at the company in 2019 and 2020. In 2021, SoftBank took WeWork public through a special purpose acquisition company. But apparently, this failed to do the trick. Soaring inflation and souring economic prospects also chipped away at WeWork, adding to its woes.
In the immediate future, WeWork, which just secured a seven-day extension from its creditors on an interest payment, will be mired in negotiations, a far cry from its heyday of courting deep-pocketed investors and reported "workspace tequila shots."