WeWork’s collapse has marked a stunning downfall for what was once the world’s most valuable start-up.
The office-sharing company – which rode the venture capital boom and was valued at nearly £40billion at its peak – filed for a Chapter 11 bankruptcy in the early hours of yesterday after days of speculation over its future.
Stricken WeWork has told its UK tenants that it is business as usual at its beer-on-tap and dog-friendly offices – despite crashing into bankruptcy in the US.
Shares were suspended on Wall Street on Monday having fallen 98 per cent so far this year as it crumbled under the pressure of expensive leases and slow demand for its offices after the pandemic.
The company has racked up debts of as much as £15billion, according to its bankruptcy filing.
Saddened: WeWork founder Adam Neumann (pictured with wife Rebeka) who was ousted nearly four years ago, expressed his disappointment at the fate of the business
Adam Neumann, WeWork’s infamous co-founder who was ousted nearly four years ago, expressed his disappointment at the fate of the business he helped build.
In a statement, he said: ‘It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before.
‘I believe that, with the right strategy and team, a reorganisation will enable WeWork to emerge successfully.’
WeWork, which rents desk space at 777 offices in 39 countries, has around 50 locations in the UK and Ireland. It is the largest occupier of office space in London.
As news of its bankruptcy sent shockwaves through the industry, chief executive David Tolley attempted to calm the nerves of office workers in Britain, claiming there will be no changes in how they do business.
In an email seen by the Mail, he wrote: ‘WeWork made the proactive decision to commence a strategic reorganisation process to best position the company for future success.
‘This process is not happening in your country and we expect there to be no changes to WeWork’s operations there.’
But rivals are already picking over WeWork’s carcass. Office provider IWG, which owns Regus, said yesterday it was ‘spending time’ looking at WeWork sites having already acquired ‘a few’ in the last week.
IWG chief executive Mark Dixon said WeWork had ‘the wrong set-up in the beginning and they didn’t fix it’, adding: ‘If you can’t make a margin, then you are not in business.’
WeWork was co-founded by Neumann in 2010 with the goal of dominating the global office-sharing market.
The eccentric entrepreneur garnered public attention through his ‘partyer-in-chief’ style, organising 2am work meetings fuelled by expensive tequila and running barefoot through his offices as well as the streets of New York.
He told Time magazine in 2017: ‘WeWork is working to create a world where people make a life and not just a living.’
Neumann, 44, claimed he was building ‘the world’s first physical social network’.
Rebekah Neumann, his wife, also played a key role in the growing empire as a WeWork executive. It was reported Rebekah, who is first cousins with actress Gwyneth Paltrow, demanded staff be sacked purely because they had ‘bad energy’.
Despite their unconventional leadership, WeWork was able to grow into one of the hottest tech start-ups thanks to the era of low interest rates and growing venture capital interest through the 2010s.
At its peak in early 2019, it was planning to list on the stock market in New York with a value of £38billion and backing from the likes of Japan’s SoftBank.
But these plans fell through with investors increasingly spooked by Neumann’s involvement and the amount of cash WeWork was burning through.
Collapse: Wework filed for a Chapter 11 bankruptcy in the early hours of yesterday after days of speculation over its future
Neumann was forced to step down in September 2019 over concerns about his behaviour, which included allegations about his use of company cash and drug use.
And the curiosity around him has been so high that he and his wife became the topic of a recent TV mini series WeCrashed, which stars Jared Leto and Anne Hathaway.
Although WeWork was eventually bailed out by SoftBank and able to list in 2021 with a £7.4billion valuation, it has struggled to rally the same momentum of the early days.
This was only made worse by the pandemic when workers swapped hot-desking for working from home.
Over the past two and a half years, the company has made losses of £6.2billion and has never posted a quarterly profit.
Despite making a series of cuts to turn its finances around, it has still burnt through £81million of cash each month in the first half of the year and warned in August that there was ‘substantial doubt’ hanging over the company.
WeWork’s bankruptcy is costing SoftBank around £11billion in equity and debt in a bruising setback for boss Masayoshi Son, who was a major cheerleader for the company.
Ross Gerber, an advisor at US investment firm Gerber Kawasaki, said the bankruptcy was likely to cause a ‘huge amount of pain’ for commercial landlords.