WeWork files for bankruptcy

The co-working space provider WeWork filed for bankruptcy protection in a New Jersey court on November 6th.

WeWork announced it has reached an agreement with most creditors and will scale back its business operations. The company statement indicated the bankruptcy will be limited to WeWork locations in the United States and Canada. The company currently has debts ranging from approximately $10 billion to $50 billion.

"I am truly grateful for the support of stakeholders in our process of strengthening our capital structure and implementing this process through the Restructuring Support Agreement. We remain committed to investing in quality products, services, and our workforce to support our communities," WeWork CEO David Tolley said in a statement. Trading in WeWork shares was suspended on November 6th.

The WeWork logo outside its San Francisco office (California, USA). Photo: Reuters

Backed by Japanese telecommunications giant SoftBank, WeWork was valued at $47 billion in 2019. It was a darling of venture capital investors, but its performance fell short of expectations.

The company fell into disarray after its 2019 IPO failed due to investor skepticism about the shared office model. That same year, co-founder Adam Neumann was also fired following scandals regarding his management style.

The pandemic further hampered WeWork's operations as many companies abruptly terminated their office leases. The subsequent economic downturn led to even more business closures.

In 2021, WeWork officially went public through a merger with a special purpose acquisition company (SPAC). However, since then, they have lost 98% of their value. In August 2023, WeWork mentioned the risk of bankruptcy.

Former WeWork CEO and co-founder Adam Neumann said the filing for bankruptcy protection was "disappointing." "I've seen the company slide since 2019, when it failed to push forward with a product that's more relevant than ever. But I believe that with the right strategy and personnel, restructuring will help WeWork bounce back strongly," he said.

WeWork's business model involves leasing office buildings (or individual floors) long-term and then renovating them for rent. It's not simply about providing flexible, short-term workspace; they strategically attract clients with luxurious, modern spaces and amenities for community interaction, entertainment, and dining.

According to the report, WeWork currently leases approximately 777 locations across 39 countries, with 30% in the US. The company is expected to pay an estimated $10 billion in rent starting from the second half of this year through the end of 2027, and an additional $15 billion starting in 2028.

Ha Thu (according to CNBC)

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