Backers once invested in WeWork at a staggering valuation of $47 billion. Now the office space provider wants to reorganize itself through insolvency proceedings. Business had been limping for years.
The office space provider WeWork, which was once one of the most valuable start-ups, has filed for bankruptcy. The company wants to reposition itself and, among other things, reduce its offering of office space. Lenders who are behind around 92 percent of WeWork’s debt have agreed to the plan, the company announced overnight.
The idea behind WeWork is to rent office space with shared infrastructure to start-ups and entrepreneurs in so-called co-working spaces. According to the latest information, the company recently had 660 such locations in 119 cities around the world. In Germany, WeWork is present in Berlin and Frankfurt, among others.
WeWork shares had already fallen dramatically last week after the Wall Street Journal reported insolvency plans. WeWork actually filed for bankruptcy with creditor protection under Chapter 11 of the US Bankruptcy Code.
WeWork has recently been in trouble again
A few years ago, WeWork became a warning example for grossly overvalued US start-ups and has recently been in trouble again. As early as August, the company admitted “significant doubts” about its continued existence in view of its losses and expected cash requirements. In September, the first steps were taken to reduce the real estate portfolio.
WeWork missed a debt payment due at the beginning of October. That started a 30-day countdown after which the company would have been officially declared insolvent. Last week, WeWork negotiated a one-week reprieve.
Thanks, among other things, to clever marketing by the founders, financiers invested in WeWork at times at a total valuation of up to $47 billion. With this reputation, WeWork wanted to go public in 2019 – but instead of a triumph, there was a flop. The deeper insight into the business in the stock market prospectus caused large investors to avoid the loss-making company.
WeWork remained unlucky
The debacle at the time was particularly expensive for billionaire Masayoshi Son’s Japanese company Softbank. Softbank and its Vision investment fund, backed by Saudi Arabian money, had secured a 29 percent stake in WeWork for nine billion dollars. When the IPO collapsed in 2019, Softbank raised another $9.5 billion to increase its stake to 80 percent and force out the controversial co-founder and boss Adam Neumann.
But even under the direction of Softbank, WeWork remained unlucky. During the corona pandemic, offices around the world emptied because people worked at home. Even after the pandemic subsided, WeWork struggled to fill office space. At the same time, rental costs for buildings had to be paid and debts had to be serviced.
In 2021, WeWork made it onto the stock market in a detour – by merging with a blank check company. After the recent price collapse, the value fell to a good $44 million.
Source: Stern
