WeWork, a company specializing in shared office spaces, has filed for bankruptcy.
CNBC reported that the company, whose headquarters is located in New York City, filed for Chapter 11 bankruptcy protection in a New Jersey federal court on Nov. 6. WeWork had entered into agreements with the vast majority of its secured note holders, and had expressed intent to trim "non-operational" leases.
In an initial filing, WeWork reported total debts of $18.65 billion against total assets of $15.06 billion – amounting to a $3.59 billion deficit. The company clarified, however, that the bankruptcy filing is limited to WeWork's locations in the U.S. and Canada.
According to CNBC, WeWork "has suffered one of the most spectacular corporate collapses in recent U.S. history over the past few years." It had been valued at $47 billion by 2019 and had received funding from Japanese telecommunications giant Softbank.
However, its attempt to go public in 2019 did not take off. The Wuhan coronavirus (COVID-19) pandemic in 2020 also impacted WeWork, as many companies abruptly ended their leases and shifted to a work-from-home setup. The post-pandemic slump caused further pain as even more clients shuttered their doors for good. (Related: Real estate collapse: LA property management firm defaults on $755M loans.)
"I am deeply grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and expedite this process through the restructuring support agreement, WeWork CEO David Tolley said in a press release. "We remain committed to investing in our products, services and world-class team of employees to support our community."
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Former CEO dubs WeWork's bankruptcy filing "disappointing"
The company leases millions of square feet of office space in 777 locations around the world, according to its regulatory filings. A Nov. 7 piece by German public broadcaster DW said WeWork has the most number of locations in North America at 242, followed by 219 in Asia and 132 in Europe.
"WeWork debuted through a special purpose acquisition company in 2021, but has since lost about 98 percent of its value," CNBC pointed out. "WeWork shares had fallen to a low of about 10 cents, and were trading at about 83 cents before the stock was halted."
In mid-August, WeWork announced a one-for-40 reverse stock split to get its shares trading back above $1, a requirement for keeping its listing on the New York Stock Exchange. It also disclosed in a regulatory filing that month that bankruptcy could be a concern.
Despite this, WeWork assured investors that it was "here to stay." It said in September that it had been "actively renegotiating leases," with its securities filings at the time stating it had close to $16 billion in long-term lease obligations.
Adam Neumann, WeWork co-founder and former CEO, described the filing as "disappointing."
"It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before," he said in a statement to CNBC. "I believe that, with the right strategy and team, a reorganization will enable WeWork to emerge successfully."
"The company pursued breakneck expansion, even while burning massive amounts of cash," the DW article wrote. This expansion turned WeWork into a "co-working leader offering spaces where different teams, companies and individuals could work together and share facilities and services."
The piece also recounted that in 2019, WeWork planned to go public. The initial public offering (IPO) was shelved, however, as governance issues and poor financials plagued the firm – leading to Neumann's ouster.
"WeWork's bankruptcy filing comes as leasing demand for office space remains weak overall. Even as companies are increasingly insisting people return to the office, at least partially, vacancies in office space remain high."
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Watch this news report about WeWork rescinding its IPO under Adam Neumann's leadership.
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