WeWork has filed for bankruptcy in federal court

New York
CNN
—

WeWork, the beleaguered coworking company, has filed for bankruptcy, marking the stunning collapse of what was once the world’s most valuable startup.

The Chapter 11 bankruptcy filing was widely expected after the company said last month it was struggling to repay its debts. The pandemic rocked WeWork as people began working from home instead of commuting to offices. The company’s shares have lost more than 99% of their value, and the SoftBank-backed venture, which was privately valued at about $47 billion at its peak, was worth $45 million on Monday before declaring bankruptcy.

WeWork said it will remain open and operating while it renegotiates its leases and debt obligations. Investors who own 92% of the company’s secured debt have agreed to amend the terms of their loans to help the company continue operating, the company said late Monday.

“It is time for us to move the future forward by addressing our legacy leases and significantly improving our balance sheet,” WeWork CEO David Tolley said in a statement. New release. “We are committed to investing in our products, services and global employee team to support our community.”

Once a much-hyped tech unicorn that promised to revolutionize the future of office work — through, among other things, streaming craft beer — a perfect storm of factors caused WeWork to begin its decline in the wake of a failed attempt to go public again in 2019.

At the time, IPO paperwork revealed larger-than-expected losses and potential conflicts of interest with the company’s co-founder and then-CEO Adam Neumann. Neumann, whose unorthodox leadership style led to WeWork’s culture becoming the subject of much news coverage, was fired in 2019 after pressure from investors. (Notably, Newman still received an eye-catching gold parachute upon his departure.)

WeWork eventually went public about two years later at a deeply discounted valuation of about $9 billion. But by 2021, market sentiment, and the easy access to capital that helped fuel much of the startup world before the pandemic, began to shift. Although WeWork described itself as a technology company, some critics pointed out that its core business was not in technology but was actually in real estate, leasing space in office buildings to modernize and sublease to startups and freelancers as well as companies large and small. .

Even after going public, the company struggled to turn itself around. The flexible workspace provider has been having a tough time in the commercial real estate sector after the pandemic led to a rise in hybrid and work-from-home options — threatening the very office culture that WeWork was built on. Meanwhile, increasing competition in the coworking space, rising interest rates and macroeconomic uncertainty have cast a pall over WeWork’s attempts to save itself over the past few years.

WeWork shares are down nearly 98% in 2023 alone. In May, WeWork announced a change in leadership with the departure of Chairman and CEO Sandeep Mathrani, a real estate executive who investors had hoped would save the company. WeWork board member David Tolley took over as interim CEO and was officially named CEO in October. In August, meanwhile, The company said it had “serious doubts” About its ability to continue operating during the coming year as losses and debts continue to increase.