WeWork, Once a $47 Billion Giant, Succumbs To Bankruptcy; What Went Wrong?
WeWork, the co-working unicorn, was once valued at $47 billion. The company recently filed for bankruptcy protection in the US. The company’s largest investor, SoftBank, took control of the struggling company, per the Wall Street Journal, infusing it with a rescue funding package. The deal now values the company at $8 billion. WeWork's rise and fall has been the subject of an Apple TV Miniseries called “WeCrashed”. Here’s all you need to know about WeWork’s dramatic journey.
The birth of WeWork
WeWork was founded by Israeli businessman Adam Neumann and his American counterpart Miguel McKelvey in 2010. The two came up with the concept after being inspired by empty office spaces following the 2008 financial crisis. The idea was to provide freelancers, start-up founders, and companies that struggled in the crisis with a rented desk or workspace for as long or as little as they needed it.
The business model of WeWork works on the company taking out long-term leases on huge properties in prime locations and then renting or leasing them by the workstation. The business soon expanded and focused on creating communities and sparking creativity among teams. The company aspired to become a worldwide platform that supported growth, shared experiences, and true success.
Soon, WeWork became a leading provider of coworking spaces, offering its members flexible access to beautiful spaces with a culture of inclusivity, and the energy of an inspired community. They also added products and services to enhance the member experience.
The Flamboyant Founder
Adam Neumann, the tall and long-haired "genius", soon became the face of WeWork. He hosted the famous ‘We’ festivals at tech events and summits and became known as the Steve Jobs of WeWork.
His charisma attracted billions of dollars of investment. However, he was also known for his erratic and controversial behavior which concerned investors. He allegedly spent millions of investor money on several possessions. He trademarked “We” and charged his own company about $5.9 million when it changed its name to We Company, as per the New York Times.
He further made outlandish claims that he wanted to get the biggest valuation possible, achieve world peace, live forever, put a WeWork on Mars, and become the ‘president of the world’. He once claimed that WeWork’s valuation and size were based on the energy and spirituality of the company rather than its revenue.
The Rise of WeWork
For several years, Adam Neumann’s charisma and high ambition bode well for the company. By 2014, WeWork launched in dozens of countries, and it eventually became the largest commercial tenant in Manhattan, as per a report.
WeWork announced plans to expand to every continent on the globe, apart from Antarctica by 2017. In 2016, WeWork was valued at $10 billion and was dubbed one of the most innovative companies in the world, Harpers Bazaar reported.
WeWork’s private valuation peaked at $47 billion in 2019 and by this time, the company had 425 locations in 27 countries, with 400,000 paying members, as per the New York Times. However, some observers wondered how an office subleasing company achieved such a high valuation, but Neumann argued that because his company was essentially a tech company, it relied heavily on technology.
When Neumann moved to take the company public, one of the banks vying for underwriting duties even suggested that the company’s IPO valuation might be as high as $100 billion, as per a report. However, when We Company filed its pre-IPO paperwork in August 2019, things changed as the general investing public grew skeptical.
What went wrong with WeWork?
A lot went wrong for WeWork soon after it publicly filed documents for an initial public offering of shares. Before the IPO began, the company was valued at $47 billion, but once its financials were verified, it was discovered that the company was worth $10 billion, Reuters reported. This caused the IPO to be called off entirely.
It was found that WeWork was losing a ton of money and its projections of growth were massively flawed. Further, their business plan was crumbling even before they filed for the IPO as they were bleeding cash to pay for the numerous leases. It was disclosed that the company had lost $2 billion in 2018 alone. Their woes were compounded by the pandemic, however, by that time, Neuman had already been kicked and the fall was imminent.
The Beginning of the End
Soon after the financial discoveries, WeWork had gone from astronomical heights to near bankruptcy. The company grappled with expensive leases and corporate clients canceling agreements. The company worked to amend its leases and restructure its debts.
Neumann started selling his assets including the hugely controversial private jet. The company then fired his equally controversial family and friends, including his wife Rebekah, as per Harpers Bazaar.
Job cuts were made and thousands of employees lost employment. Towards the end of 2019, Neumann was ousted as CEO, and SoftBank, the company’s main investor took over. Since then several locations have closed, and WeWork lost another $2 billion and 70% of its membership.
It was revealed that paying for space consumed 74% of the company’s revenue in the second quarter of 2023, as per National News. In November, WeWork ultimately sought US bankruptcy protection. In the bankruptcy filing, the company reported estimated assets and liabilities ranging from $10 billion to $50 billion.
What’s next for WeWork?
WeWork said that about 92% of the company's lenders have agreed to convert their secured debt into equity, clearing out about $3 billion of debt. The company has announced that it will also file for bankruptcy in Canada. However, it will continue operating as it works to raise finances, and it has stressed that its operations outside North America will remain unaffected, as per the National News.
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