One-time unicorn startup WeWork filed for Chapter 11 bankruptcy protection in New Jersey federal court on Monday.
According to the filing, the company reported liabilities ranging from $10-$50billion.
WeWork CEO David Tolley, who assumed the role after the last CEO resigned in August, said: ‘I am deeply grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and expedite this process through the Restructuring Support Agreement.’
‘We remain committed to investing in our products, services, and world-class team of employees to support our community.’
The company suffered a spectacular public collapse after being valued at $47billion in 2019 and then failing to go public.
WeWork filed for Chapter 11 bankruptcy protection on Monday
The COVID19 pandemic wrought further havoc on the company as remote work and abrupt lease terminations tanked the value of office space.
In August, the company disclosed that bankruptcy could be a concern.
Problems first started for the New York-based company, which was founded in 2010, when it sought to go public in 2019.
In August of that year, the firm, which rents out co-working spaces to freelancers, start-ups and established companies, published its full financials – revealing a $900 million loss in six months.
The IPO failed after investors raised concerns over its business model and governance under founder and then-CEO Adam Neumann – and the company suffered a spectacular collapse, seeing its valuation plummet to less than $10 billion.
Neumann fell from grace and was eventually ousted amid claims of a toxic environment at WeWork.
Despite the company’s utopian image, employees later characterized it as having a ‘cult-like’ environment, and called Neumann the ‘partyer in chief’ while describing his ‘tequila-fueled leadership style,’ which included smoking marijuana on private jets.
In one alleged incident of excess, Neumann threw a three day party for 8,000 employees to celebrate the company’s $37billion valuation.
In his book Billion Dollar Loser: The Epic Rise and Fall of WeWork, Reeves Wiedeman wrote that Neumann demanded that cases of Don Julio 1942 tequila were at every office and would ‘lose his s***’ if they were not there.
The New York-based workspace-sharing firm rents out co-working spaces to freelancers, start-ups and established companies
Founder Adam Neumann was forced to step down as CEO following a failed IPO in 2019
Despite poor wages at WeWork angering staff, Neumann bragged about how little he paid his staff and insisted there they were supposed to use a ‘sense of purpose’ and free beer to pay their bills, the book said.
In 2020, it was reported that the company paid off a female whistleblower with more that $2million in cash to stay quiet after she threatened to expose an alleged culture of drug-taking, sleeping with colleagues and discrimination at the company, and claimed that she was a victim of a sex assault.
The company eventually went public in October 2021, through a merger with a special purpose acquisition company, but the turbulence continued.
WeWork was badly stung by the Covid-19 pandemic, as social distancing caused people to increasingly work from home, and it has still not reported a profit since restrictions were eased.
The company told regulators on August 8 that macroeconomic conditions have further weakened demand for its shared office spaces, and it has suffered from high member turnover rates.
WeWork has 512,000 members at its workspaces across 33 countries – and there are currently 32 co-working locations across the US, according to the company’s website.
WeWork’s interim CEO, David Tolley, took over in May 2023
But office vacancies in the United States have exceeded 20 percent early this year, according to real estate services company JLL.
Columbia University researchers also found a 45 percent drop in office values in 2020, with little recovery projected in the years to come.
In May, CEO Sandeep Mathrani stepped down and board member David Tolley took over as interim CEO.
Three board members resigned in the first week of August because of ‘a material disagreement regarding Board governance and the Company’s strategic and tactical direction.’
The company struck deals in March to cut its debt by about $1.5 billion and extend the date of some maturities to preserve cash.
Tolley acknowledged some brighter spots in the business on August 9, pointing to a growth in revenue, but he also listed the headwinds faced by the company – including a surfeit of office space and increased competition from other co-working firms.
In order to remain viable, WeWork said it would need to reduce the cost of its leases and seek ‘additional capital via issuance of debt or equity securities or asset sales.’