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Wednesday June 19, 2024

WeWork files for bankruptcy after drop in shares

In early August, WeWork had warned US stock market regulator SEC that it feared for its survival

By Web Desk
November 07, 2023
The WeWork logo is displayed outside of an office space rental location in Santa Monica, California on March 20, 2023. — AFP
The WeWork logo is displayed outside of an office space rental location in Santa Monica, California on March 20, 2023. — AFP

WeWork, the shared office giant backed by Japanese technology group SoftBank, announced Monday that it had filed for bankruptcy in a bid to negotiate down its debt after years of serious financial trouble.

The company said that while its bankruptcy impacts its operations in the United States and Canada, "global operations are expected to continue as usual."

"Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet," WeWork chief executive David Tolley said in a statement.

"We defined a new category of working, and these steps will enable us to remain the global leader in flexible work."

In early August, WeWork had warned the US Securities and Exchange Commission (SEC) — the US stock market regulator — that it feared for its survival.

"Substantial doubt exists about the company's ability to continue as a going concern."

The company claims that a decline in the number of tenants, liquidity requirements, and financial losses led to its decision. It clarified that a decline in demand brought on by unfavourable economic conditions was the reason for its billion-dollar losses in the first half of 2023.

Rating agency Standard and Poor's 500 (S&P) said on November 1 that WeWork is in "selective default" after failing to meet conditions set by debt holders, AFP reported.

WeWork has been a celebrated star in the sharing economy that put a mammoth footprint in the commercial real estate of major cities around the globe.

However, investors were tired of its messianic then-chief executive Adam Neumann, massive operating costs and lack of profits in 2019, when it tried to go public with a massive valuation of $49 billion.

Neumann was axed that year, albeit with a golden parachute, but WeWork's slide only accelerated during the COVID-19 pandemic and the rise of telecommuting.

WeWork's shares were worth just 80 cents at the close of trading on the New York Stock Exchange on Monday evening, for a market capitalisation of $44.5 million.