WeWork, the real estate company that offered startups and individuals stylish accommodations to pursue their business dreams, filed for bankruptcy protection in the United States on Monday after years of struggling to find its feet.
The company filed for Chapter 11 bankruptcy protection in New Jersey, as part of what it described as a “comprehensive reorganization” of its business.
The company said creditors holding 92 percent of its secured debt had agreed to a restructuring plan that would include reducing its portfolio of office leases.
“As part of today’s filing, WeWork is requesting the ability to decline leases for certain locations, which are largely non-operational, and all affected members have been given prior notice,” the company said in a statement.
In September, WeWork said it would begin renegotiating all of its leases and abandon certain locations. In your website, lists 660 locations in 37 countries, compared to the 764 locations in 38 countries it had about two years earlier. The company was leasing nearly 20 million square feet of office space in June, more than any other company in the United States. Monday’s actions will not affect WeWork franchises outside the United States and Canada, the company said.
WeWork’s demise is a blow to landlords who have leased a large proportion of their space to the company. Many landlords have accepted lower rents from WeWork in recent years, and some are struggling to pay off the debt tied to their buildings. Since the pandemic, fewer employees have gone to the office, leading to one of the worst crises in commercial real estate in decades.
WeWork has been sending distress signals for months. In March, it reached a deal with a major investor, Japanese technology conglomerate SoftBank, and others to significantly reduce its debt and raise new financing. Still, he said in August that there were “substantial doubts” about his ability to remain in business. And last month, WeWork said it would waive interest payments on a total of $95 million, a move intended to help it negotiate with its lenders as it sought to cut costs with its landlords. After a 30-day grace period, the company reached an agreement with creditors for a seven-day forbearance, which expires Tuesday.
WeWork shares have fallen more than 98 percent since the beginning of the year, and the company was valued at less than $45 million as of Friday. At its peak in January 2019, the company was worth about $47 billion.
The financial challenges are the downsizing of a startup that once sought to “raise the world’s consciousness.” WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey, and opened its first location in Lower Manhattan in 2011. It focused on leasing, rather than buying, office space and spreading it among clients that included freelancers, small businesses, and larger corporations. big.
The company expanded at a rapid pace throughout the 2010s, opening branches in San Francisco, Los Angeles, Seattle, Tel Aviv and London.
Their spending was largely financed by SoftBank, which bet that spending freely on startups would allow companies to grow faster than their rivals and establish dominant positions in their industries. SoftBank invested more than $10 billion in WeWork.
The company became synonymous with coworking, a trend that was embraced by millennials who were self-employed or engrossed in startup culture. Workers typed on their laptops in open workspaces or ducked into glass conference rooms to attend meetings. They were places for people to chat and share ideas while drinking cold beer and kombucha on tap.
In August 2019, WeWork attempted to go public. It was the largest private tenant in Manhattan and one of the most valuable startups at a time when Silicon Valley investors were pouring fanciful amounts of money into young companies.
But as Wall Street learned more about the company’s governance problems and its huge losses, The initial public offering was shelved the following month. Shortly afterward, Neumann resigned as CEO. By not going public, the company was running out of money and needed a bailout. In October 2019, SoftBank provided a lifeline that valued the company at $7 billion.
Sandeep Mathrani, an executive who had worked in real estate companies, became CEO of WeWork in February 2020. Then the pandemic hit, prompting many professionals to work from home and compounding WeWork’s problems.
Under Mathrani, WeWork went public in October 2021 through a merger with a special purpose acquisition company. It also began closing stores and renegotiating lease contracts with landlords. Mathrani oversaw a restructuring this spring that reduced the company’s debt. In May, shortly after the restructuring, Mathrani left the company after reportedly becoming frustrated with SoftBank.
Last month, WeWork announced a new CEO, David Tolley, who had previously held the position on an interim basis. “WeWork has a solid foundation, a dynamic business and a bright future,” Tolley said in a statement Monday.
