WeWork’s warning that it is teetering on the edge of bankruptcy sent the office-sharing company’s shares to nearly zero Wednesday in a spectacular fall for a firm once valued at tens of billions of dollars.
The news signals the end of what has been the company’s years-long, tumultuous, cash-burning quest to make its luxe workplace subleasing model work.
WeWork was founded in 2011, and its “space-as-a-service” pitch proved alluring to investors and customers alike.
The company based in New York drew intrigue for its innovative approach to work spaces for small firms and grew to have a global footprint, even landing partnerships with several major corporations, including Salesforce and Microsoft.
By the time the company first tried to go public in 2019, it was valued at $47 billion, but that effort was scrapped after investors balked at its high debt levels, massive losses and how quickly it was burning through cash.
Investors also became fed up with the exorbitant spending and erratic behavior from co-founder and then-CEO Adam Neumann, who was later ousted but was handed an enormous golden parachute to leave.
WeWork’s major backer, Japanese conglomerate Softbank, took control of the company with a bailout and offered Neumann a nearly $1.7 billion payout that left him with significant stock control.
WeWork’s new chairman following Neumann’s departure, Marcelo Claure, defended the decision, saying, “There’s a level of gratefulness that we’re going to have for Adam because he’s the one who built this business,” and emphasizing the company would now face “zero risk” of bankruptcy.
Softbank later sought to claw back its offer to Neumann, who then sued, resulting in renegotiation of the deal that was ultimately settled to make way for WeWork’s public debut.
The firm finally became a publicly traded company in 2021 via a special purpose acquisition company (SPAC) deal but was never able to turn a profit.
The beleaguered company’s leadership struggles did not end with Neumann. Three board members jumped ship this week, and the company has still not found a permanent replacement for former CEO Sandeep Mathrani, who left in May.
Reuters columnist Robert Cyran wrote Wednesday that WeWork “was built largely on hype and being valued more like technology than real estate.” He said the company was poorly managed, and he was critical of its attempt at “multitasking on everything from schools to wave pools” rather than taking a more conservative approach to subleasing.
FOX Business’ Daniella Genovese and Reuters contributed to this report.