WeWork Plans to File for Bankruptcy Over Massive Debt

WeWork plans to file for bankruptcy as early as next week, as the SoftBank Group-backed company struggles with a massive debt pile and hefty losses.

Shares of the flexible workspace provider fell 32 percent in extended trading after the Wall Street Journal reported the news. They have fallen roughly 96 percent this year. The company never seemed to recover from the scandal of its founder’s ouster and the remote work revolution of the pandemic.

New York-based WeWork is considering filing a Chapter 11 petition in New Jersey, the WSJ reported, citing people familiar with the matter.

Earlier on Tuesday, WeWork said it had entered into an agreement with creditors for temporary postponement of payments for some of its debt, with the grace period nearing an end.

The company had a net long-term debt of $2.9 billion as of the end of June and more than $13 billion in long-term leases. This is at a time when rising borrowing costs are hurting the commercial real estate sector.

Co-founded by Adam Neumann, WeWork began operations in 2010 in New York, catering mainly to freelancers, startups, and small businesses. It then grew rapidly to include larger clients.

As of December 31, 2022, the company operated 43.9 million square feet (4,080,000 m2) of space, including 18.3 million square feet (1,700,000 m2) in the United States and Canada, in 779 locations in 39 countries, and had 547,000 members, with a weighted average commitment term of nineteen months.

Bankruptcy is a stunning reversal for WeWork once valued at $47bn

WeWork’s filing for bankruptcy would mark a stunning reversal of fortune for the company, privately valued at $47 billion in 2019. It remained a black spot on the balance sheet of investor SoftBank, which sunk billions into the company.

The company has been in turmoil ever since its plans to go public in 2019 imploded following investors’ skepticism over its business model of taking long-term leases and renting them short term, worries over its hefty losses, and remote work.

The New York Times described the company’s failed effort to go public and its related turmoil as “an implosion unlike any other in the history of start-ups.”

WeWork’s woes did not abate in subsequent years. It finally managed to go public in 2021 at a much-reduced valuation. Its major backer, Japanese conglomerate SoftBank, invested tens of billions to prop up the startup, but the company has continued to lose money.

WeWork raised “substantial doubt” about its ability to continue operations in August with numerous top executives, including CEO Sandeep Mathrani, departing this year.

In August 2023, the company warned that it had ‘substantial doubt’ it could stay in business and announced it would potentially file for Chapter 11 bankruptcy protection.