WeWork, the once-strange startup that peaked at the valuation of $47 billion, filed for Chapter 11 bankruptcy protection in a New Jersey federal court on Monday.
The corporation disclosed over $15 billion in assets and over $18 billion in debt in its bankruptcy case. In addition, there is about $100 million in overdue rent.
According to the firm, 92% of its lenders approved a restructuring plan that would have kept WeWork open during the reorganization, with the closure of many dozens of locations anticipated.
“WeWork is requesting the power to reject the leases of certain locations as part of today’s filing, which is largely non-operational since all affected members have received advanced notice,” a statement from WeWork Chief Executive David Tolley said.
WeWork is worth $44 million, yet its stock is down 99.2% since the beginning of the year.
The company, which at its peak attracted billions of dollars in capital from wealthy investors for giving the less glamorous industry of subleasing office space to employees a Silicon Valley twist, has reached an astonishing new low with its bankruptcy filing.
An idea for office work that was never completely implemented
WeWork was founded in 2010 by Adam Neumann, an eccentric, colorful, and occasionally barefoot entrepreneur. It grew quickly and made the grandiose endeavor to completely transform the way people work, but it was never able to achieve that.
WeWork, according to Neumann, is “the world’s first physical social network,” with workplace spaces that frequently have beer and kombucha on tap in addition to elegant furniture and simple décor. He had wanted to attract office workers and remote freelancers to WeWork locations in order to create a global community that shared his belief in “the energy of We” and aspired to “elevate the world’s consciousness.”
However, the New Age pronouncements were overthrown by a more sobering fact: the incapacity to cover its expenses.
With the intention of turning a profit on extremely brief subleases, WeWork invested enormous sums of money in renovating office buildings on long-term leases all around the world.
But when it became apparent that Neumann had no true strategy for leasing its massive portfolio of properties, several years in the future, issues surfaced.
Long-term leases were for far too much space, and there weren’t enough people to fill it. Consequently, the business model collapsed, taking Neumann with it.
In 2019, Neumann was fired and WeWork laid off thousands of employees as its valuation was lowered to $7 billion. It came after Neumann’s disastrous attempt to go public with the business.
An effort to take WeWork in a different direction
Sandeep Mathrani, a former real estate executive, took over the company when Neumann resigned and made an effort to turn things around.
As he led WeWork through the pandemic, he reduced expenses and let go of staff members—a particularly harsh period for businesses that rent out office space.
Even after taking WeWork public, Mathrani unexpectedly resigned earlier this year.
Since then, the organization has faced numerous difficulties.
WeWork announced in August that there was “substantial doubt” about its capacity to continue operating because of growing losses and cash flow issues.
It hurried to get landlords to agree to new lease terms. However, it was up against more rivals in the market for temporary office space. Furthermore, the company was unable to regain its footing since a large number of office personnel opted to work from home.
WeWork’s stock hit an all-time low in October following the company’s admission that it lacked the cash on hand to pay its debt’s interest.
As per a June Securities and Exchange Commission report, WeWork retained over 700 outlets in nearly 40 countries despite its reduced size during the Neumann years.