WeWork has filed for bankruptcy. The move comes as the company faces mounting debts, high interest rates and an increasing number of people working from home.
WeWork filed for Chapter 11 protection, the company announcement Monday evening. The process allows a business to continue operating as it reorganizes. Overall, WeWork locations will remain open, the company says, and the process only affects locations in the United States and Canada, as it plans to file for similar protection there as well.
But as part of its filing, WeWork is asking to leave leases in some locations that it says are “largely non-operational.”
“Now is the time for us to move forward into the future by aggressively addressing our existing leases and significantly improving our balance sheet,” WeWork CEO David Tolley said in announcing the bankruptcy filing.
It’s the continuation of an epic downfall for the once-hot coworking company. In 2019, with a lofty valuation of $47 billion, the company attempted to go public but failed before ousting its eccentric founder and CEO Adam Neumann. In 2021, following a restructuring, WeWork went public. Today, WeWork has a market capitalization of around $45 million.
Even as WeWork turned around and put more experienced leaders in place, it faced huge changes in the real estate market. The Covid-19 pandemic has emptied offices around the world and demand for working from home has increased since then. Today, expensive offices in once-bustling city centers sit empty. Dylan Burzinski, an analyst at real estate consultancy Green Street and head of office sector research, says such rapid changes have hit WeWork hard. Today, WeWork is struggling to compete with cheap office space as interest rates rise, presenting additional risk.
And 2023 has proven to be another tumultuous year for WeWork. CEO Sandeep Mathrani left the company in May, after joining in 2020. He issued a business continuity warning in August, a decision that raised doubts about its future survival. WeWork then failed to make required interest payments beginning of October.
In September letter, Tolley wrote that the company was working to “renegotiate almost all of our leases” and would close underperforming locations. Tolley said the company’s leases represented two-thirds of its total operating expenses in the second quarter of 2023 and were “too high and radically out of step with current market conditions.” But, at the time, Tolley was optimistic: “Let me end by making one thing clear: WeWork is here to stay. »