WeWork, the real estate company that offered startups and individuals sleek quarters to pursue their entrepreneurial dreams, filed for bankruptcy protection in the United States on Monday after years of struggling to find its footing.
The company filed for Chapter 11 bankruptcy protection in New Jersey, as part of what it described as a “comprehensive reorganization” of its business.
The company said creditors holding 92% of its secured debt had agreed on a restructuring plan that would include reducing its portfolio of office leases.
“As part of today’s filing, WeWork is requesting the ability to reject the leases of certain locations, which are largely nonoperational, and all affected members have received advanced notice,” the company said in a statement. It reported debts of more than $18 billion in its filing.
In September, WeWork said it would begin to renegotiate all its leases and exit certain locations. On its website, it lists 660 locations in 37 countries, down from the 764 locations in 38 countries it had about two years earlier. The company was renting nearly 20 million square feet of office space in June, more than any other company in the United States. Monday’s actions will not affect WeWork franchises outside the United States and Canada, the company said.
WeWork’s demise is a blow for landlords who have leased a large proportion of their space to the company. Many landlords have accepted lower rents from WeWork in recent years, and some are struggling to make payments on the debt tied to their buildings. Since the pandemic, fewer employees have been going into the office, causing one of the worst crunches in commercial real estate in decades.
WeWork has been sending distress signals for months. In March, it reached a deal with a major investor, Japanese technology conglomerate SoftBank, and others to significantly reduce its debt and secure new financing. Still, it said in August that there was “substantial doubt” about its ability to stay in business. And last month, WeWork said it would miss interest payments totaling $95 million — a move intended to help it negotiate with its lenders as it sought to cut costs with its landlords. After a 30-day grace period, the company reached a deal with creditors for a seven-day forbearance, which expires Tuesday.
WeWork’s stock has fallen more than 98% since the start of the year, and the company was valued at less than $45 million as of Friday. At its peak, in January 2019, the company was worth around $47 billion.
The financial challenges are the retrenchment of a startup that once sought to “elevate the world’s consciousness.” WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey, and opened its first location in New York City in 2011. It focused on leasing, rather than buying, office space and parceling it out to customers including freelancers, small businesses and larger corporations.
The company expanded at a breakneck pace throughout the 2010s, opening locations in San Francisco, Los Angeles, Seattle, London and Tel Aviv, Israel.
Its spending was largely financed by SoftBank, which bet that spending freely on startups would allow the companies to grow faster than their rivals and establish dominant positions in their industries. SoftBank invested more than $10 billion in WeWork.
The company became synonymous with coworking, a trend that was embraced by millennials doing freelance work or engrossed in startup culture. Workers would type away on their laptops in open-floor work spaces or duck into glass conference rooms to take meetings. They were places for people to chat and share ideas all while sipping on the cold brew and kombucha that were on tap.
In August 2019, WeWork sought to go public. It was the largest private tenant in the Manhattan borough of New York City and one of the most valuable startups at a time when Silicon Valley investors were pouring fanciful amounts of money into young companies.
But as Wall Street learned more about governance issues at the company and its huge losses, the initial public offering was shelved the next month. Neumann stepped down as CEO soon after. With the failure to go public, the company was running out of money and needed a bailout. In October 2019, SoftBank provided a lifeline that valued the company at $7 billion.
Sandeep Mathrani, an executive who had spent a career working at real estate firms, became WeWork’s CEO in February 2020. Then the pandemic hit, leading many professionals to work from home and adding to WeWork’s troubles.
Under Mathrani, WeWork went public in October 2021 through a merger with a special-purpose acquisition company. It also started closing locations and renegotiating leases with landlords. Mathrani oversaw a restructuring this spring that cut the company’s debt. In May, shortly after the restructuring, Mathrani left the company after reportedly growing frustrated with SoftBank.
Last month, WeWork announced a new CEO, David Tolley, who had previously filled the role on an interim basis. “WeWork has a strong foundation, a dynamic business and a bright future,” Tolley said in a statement Monday.