WeWork Inc. filed for chapter 11 bankruptcy in New Jersey. The filing allows WeWork to keep operating while it works out a plan to repay its debts.
WeWork, once valued at $47bn on the private market, endured a 98% decline in its share price this year, leaving it with a market capitalization of less than $50m.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” WeWork CEO David Tolley said as he announced the bankruptcy filing.
Shares in WeWork were suspended on Monday as Wall Street braced for it to file for bankruptcy, following reports that it was planning to do so.
Even as WeWork straightened up and put in place more experienced leaders, it faced huge shifts in the real estate market. The Covid-19 pandemic emptied offices worldwide, and demand for working from home has risen since. Now, expensive offices in once bustling downtowns sit empty.
Other shared office space firms have also stumbled after the pandemic upended working habits. Knotel Inc. and subsidiaries of IWG Plc sought bankruptcy in 2021 and 2020, respectively.
The business never quite recovered from the ouster of its founder, Adam Neumann, who resigned in September 2019 amid a push to go public, and the remote work revolution of the coronavirus pandemic.
Neumann received a $445m payout package on his exit.
As of June, the company had $13 billion in long-term lease obligations, according to its second-quarter earnings report. Its revenue was up year over year and its losses down, but WeWork’s second quarter revenue of $844 million was nearly eclipsed by the $725 million it spent on location operating costs. At the time, WeWork had 777 locations in 39 countries, and 72 percent of its space was occupied. It said in November 2022 it would close 40 underperforming locations in the US.
WeWork India has emerged as one of the strongest units in the WeWork franchise, and is largely insulated from the bankruptcy as majority of it is owned by Embassy Group. The India unit makes money and doesn’t need external capital to operate, the India head said in a statement today.
