WeWork has officially filed for Chapter 11 bankruptcy protection in New Jersey federal courts as the office sharing firm looks to reduce debt and “rationalize” its commercial real estate holdings.
In a statement on 6 November, the company said it had entered into a Restructuring Support Agreement (RSA) with note holders and plans to “drastically reduce” existing funded debt as part of a restructuring plan.
Court filings show the firm has liabilities of between $10 billion and $50 billion.
As part of the move, WeWork said it will also request the ability to reject leases at certain “non-operational” locations. Affected members have been given advanced notice.
WeWork confirmed the bankruptcy filing applies to its US and Canada locations.
The move marks an unedifying end for a company that was once considered a foundational model for how co-working spaces should operate.
Once valued at $47 billion, WeWork framed itself as the future of flexible working, providing office space to businesses ranging from individual hot deskers to startups and enterprises.
At its peak, WeWork had locations in more than 30 countries, and boasted more than half a million members. In 2017, SoftBank invested more than $4.4 billion in the firm.
The company’s monumental rise coincided with a boom period in the global technology industry, which it was able to capitalize on. Plans to go public at a valuation of $47 billion resulted in disaster for the provider, however.
The firm’s botched IPO in 2019 was brought about by concerns over the company leadership and the longevity of its business model, marking a turning point for WeWork.
When it did go public two years later in 2021, it did so at a valuation of just $9 billion.
WeWork’s fall from grace
WeWork has faced significant challenges in recent years, not least the declining demand for office space during the Covid pandemic.
The scale of the firm’s financial troubles were laid bare in August 2023 when SEC filings warned that its “losses and negative cash flow” raised “substantial doubt” over its ability to continue operating.
“If we are not successful in improving our liquidity position and the profitability of our operations, we may need to consider all strategic alternatives,” the company said at the time.
The first indication that WeWork could consider bankruptcy was in those SEC filings. The firm said it was considering “strategic alternatives” which included debt refinancing, the sale of assets, or “obtaining relief under the US bankruptcy code”.
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That same month, the earnings reports recorded a net loss of $397 million across the second quarter of 2023, further underlining its torrid financial predicament.
In early October 2023, WeWork also missed interest payments to bondholders. The firm was given 30 days grace to provide bondholders with payments, securities filings show.
The hard reality for WeWork is that it’s been unable to contend with changing work practices brought about by the pandemic.
This cultural shift has been further exacerbated by difficult macroeconomic conditions that have forced firms to reevaluate their real estate spending, forcing many to question the necessity of paying premiums for flexible work spaces.
