Flexible office space company WeWork has filed for Chapter 11 bankruptcy protection, a notable collapse for the once high-flying startup co-founded by Adam Neumann and financed by SoftBank, BlackRock and Goldman Sachs.
The New York-based company, which raised more than $22 billion and was valued at $47 billion at its peak, listed assets and liabilities ranging from $10 billion to $50 billion in its petition filed in federal court in New Jersey.
WeWork CEO David Tolley said about 90% of the company’s lenders have agreed to convert their $3 billion in debt into equity. “It is time for us to move the future forward by aggressively addressing our legacy leases and significantly improving our balance sheet,” he said in a statement.
She said WeWork’s bankruptcy filing is limited to locations in the United States and Canada.
WeWork India has emerged as one of the strongest units in the WeWork franchise, and is largely insulated from bankruptcy as it is majority owned by the Embassy Group. India’s president told local media last week that the Indian unit is making money and does not need outside capital to operate.
WeWork is grappling with the fallout from a period of strong growth that has led to a portfolio of underperforming properties.
The company signed long-term leases during the market peak in late 2010, renovating these sites and then leasing them on terms as short as one month. The company’s strategy has faced significant challenges as the pandemic has eroded demand for coworking spaces, leading to increased vacancies and continued financial liabilities for landlords amounting to billions of dollars in rent.
WeWork’s IPO faced setbacks in 2019 due to concerns about losses and governance, leading to the withdrawal of the IPO and the exit of CEO Neumann. Neumann’s departure led to a costly settlement with WeWork and SoftBank in 2021. The company eventually went public through a SPAC merger, valuing it at $9 billion, and projecting cash operating earnings of $2 billion by 2024.
Neumann called WeWork’s bankruptcy filing “disappointing.” “It has been difficult for me to watch from the sidelines since 2019 as WeWork has failed to capitalize on a product that is more important today than ever before,” he said in a statement. I believe that with the right strategy and team, the reorganization will enable WeWork to emerge successfully.”
WeWork restructured its balance sheet this year, reducing debt by $1.5 billion and delaying debt maturities until 2027. Despite these efforts, the company’s market capitalization has fallen below $50 million, and bankruptcy could void existing shareholders’ shares. With bonds. It is now trading at faltering levels.
“We have defined a new category of business, and these steps will enable us to remain the global leader in flexible working. I am extremely grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and accelerate this process through the restructuring support agreement,” said Tolley. : “We are committed to investing in our products, services and world-class employee team to support our community.”
In revealing its earnings in August, WeWork publicly admitted there were “significant doubts” about its ability to continue.