WeWork files for bankruptcy as co-working group succumbs to empty office space that once decimated the company’s $47 billion worth

One-time unicorn startup WeWork filed for Chapter 11 bankruptcy protection in New Jersey federal court on Monday.

The filing, which was expected, is limited to the office sharing company’s locations in the US and Canada.

According to the filing, the company reported debt ranging from $10 billion to $50 billion.

WeWork CEO David Tolley, who took on the role after the last CEO resigned in August, said: “I am very grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and accelerate this process through the Restructuring Support Agreement. ‘

“We remain committed to investing in our world-class products, services and team of employees to support our community.”

The company suffered a spectacular public collapse after it was valued at $47 billion in 2019 and subsequently failed to go public.

The COVID19 pandemic caused further damage to the business as remote working and abrupt lease cancellations undermined the value of office space.

In August, the company announced that bankruptcy could be a problem.

The troubles first started for the New York-based company, which was founded in 2010, when it looked to go public in 2019.

In August that year, the company, which rents out co-working spaces to freelancers, start-ups and established companies, published its full financials, showing a loss of $900 million in six months.

The IPO failed after investors raised concerns about the business model and governance under founder and then-CEO Adam Neumann. The company collapsed in spectacular fashion and saw its valuation plummet to less than $10 billion.

Neumann fell from grace and was eventually ousted over claims of a toxic environment at WeWork.

Despite the company’s utopian image, employees later characterized it as a “cult-like” environment, calling Neumann the “party in chief” while describing his “tequila-fueled leadership style,” which included smoking marijuana on private jets.

In one alleged excessive incident, Neumann threw a three-day party for 8,000 employees to celebrate the company’s $37 billion valuation.

In his book Billion Dollar Loser: The Epic Rise and Fall of WeWork, Reeves Wiedeman wrote that Neumann demanded that there were cases of Don Julio 1942 tequila in every office and that he would ‘lose his s*** if they weren’t there.

The New York-based workspace sharing company rents out co-working spaces to freelancers, startups and established companies

Founder Adam Neumann was forced to step down as CEO after a failed IPO in 2019

Despite poor wages at WeWork that angered staff, Neumann bragged about how little he paid his staff and insisted they should use a “sense of purpose” and free beer to pay their bills, the book said.

In 2020, it was reported that the company paid a female whistleblower more than $2 million in cash to keep quiet after she threatened to expose an alleged culture of drug use, sleeping with coworkers and discrimination within the company, claiming that she was the victim of a sexual assault.

The company eventually went public in October 2021, via a merger with a special purpose acquisition company, but the turbulence continued.

WeWork was hit hard by the Covid-19 pandemic as social distancing led to people increasingly working from home, and has yet to make any gains since restrictions were eased.

The company told regulators on August 8 that macroeconomic conditions have further weakened demand for shared office space, and it is suffering from high membership turnover.

WeWork has 512,000 members at its workplaces in 33 countries – and there are currently 32 co-working locations in the US, according to the company’s website.

WeWork’s interim CEO David Tolley took over in May 2023

But according to real estate services provider JLL, office vacancy in the United States exceeded 20 percent at the beginning of this year.

Researchers at Columbia University also found a 45 percent decline in office values ​​in 2020, with little recovery expected in the coming years.

In May, CEO Sandeep Mathrani stepped down and board member David Tolley took over as interim CEO.

Three members of the board of directors resigned in the first week of August due to “a material disagreement regarding the management of the board of directors and the strategic and tactical direction of the company.”

The company struck deals in March to reduce its debt by about $1.5 billion and extend the dates of some maturities to preserve cash.

Tolley acknowledged some bright spots in the company on Aug. 9, pointing to revenue growth, but he also listed the headwinds the company faces, including a glut of office space and increased competition from other co-working companies.

To remain viable, WeWork said it would have to reduce the cost of its leases and “seek additional capital through bond or equity issuance or asset sales.”