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Once valued at a mighty $47 billion, WeWork has filed for Chapter 11 bankruptcy in New Jersey.
Despite sinking billions into the business, majority investor SoftBank has cut its losses after a tough four years, exasperated by both post-pandemic working trends and the impact of rising interest rates on the commercial property market.
In the filing, WeWork reported debts of more than $18 billion.
In a statement published on Nov. 7, WeWork CEO David Tolley said the company had entered into a restructuring support agreement and would deal with the debt by addressing legacy leases and “dramatically improving” its balance sheet.
“WeWork has a strong foundation, a dynamic business and a bright future,” Tolley added, saying the “reorganization” would allow the brand to remain the “global leader in flexible work.”
Although reports over the weekend claimed some WeWork spaces had already shut their doors, its leadership asserted that most would remain open for the foreseeable future. So it’s business as usual for the company’s 547,000 members.
Behind closed doors, though, the bankruptcy filing marks a stunning reversal of fortune for the one-time sharing economy darling.
When it first burst on to the scene in 2010, with modular furniture, beer on tap and exposed brick walls, the business was hailed as the future of work.
So, where did it all go wrong, and what’s next?
For Mary Kyriakidi, global thought leader at Kantar’s brand strategy unit, WeWork is an instructive case study for brands at a time of inflation and slow growth; it sacrificed profitability and sustainable growth at the altar of growth at speed.
“What we can learn from its demise is that brands need to focus on profit to deliver growth rather than the other way round,” Kyriakidi said.
WeCrashed
In its early days, WeWork marketed itself to investors as a tech “unicorn.” In reality, its business model was an adaptation of a traditional real-estate one; it rented large office buildings and leased the space to gig-economy freelancers, entrepreneurs and small business owners.
Like many startups, it also succumbed to the “cult of the founder,” phenomenon. In this case the charismatic Adam Neumann—once described as the “Steve Jobs” of work—was the ringleader, leveraging his personality to propel the company’s growth.
By 2019, Neumann had renamed WeWork to The We Company and expanded into living space. That year, the business was valued at $47 billion and readying for an IPO.
However, a closer look at the balance sheet and a series of dizzying allegations regarding Neumann’s personal and professional conduct (which would later be dramatized by Jared Leto in the 2022 series WeCrashed) gave investors jitters.
