Raise your on-tap kombuchas for a toast to WeWork, which burned far too bright and way too fast.
What happened: WeWork, the co-working company that once pledged to “elevate the world’s consciousness,” filed for bankruptcy in a U.S. district court, with plans to have the bankruptcy recognized in Canada. For now, its operations will continue mostly unchanged.
- As part of the proceedings, WeWork struck deals with most of its creditors to convert US$3 billion in loans and bonds into stakes in a reorganized version of the company.
- It’s also working to restructure over $13 billion in lease obligations and plans to exit 69 leases at “largely non-operational” locations, including five in B.C. and Ontario.
Catch-up: It’s been a long, precipitous downfall for a company that had a $47 billion valuation in 2019 by pioneering the idea of fancy office spaces you could just pop into.
- Its reputation took a devastating hit after a failed IPO attempt that cast serious doubts on its financial soundness and ended with the firing of CEO Adam Neumann.
- Japanese mega-investor Softbank stepped in to take majority control and took WeWork public through a SPAC in 2021 (shares have since fallen by ~99.8%).
- The company bet that occupancy rates would exceed pre-pandemic levels. When that didn’t happen, it was stuck with long leases, costing over 80% of its revenue
Bottom line: The bankruptcy goes to show how much has changed in just a few short years. WeWork was designed to be a grow-at-all-cost enterprise that would happily burn cash in the name of market dominance. A one-two punch of rate hikes and a softened office market killed the viability of that business model, and WeWork paid the price.—QH