WeWork forced to file for bankruptcy in the US

WeWork, the shared office firm that was once valued at $47bn (£38bn), has been forced to file for bankruptcy in the US.

The decision follows the meteoric rise – and fall – of a company which was once seen as the future of the workplace.

WeWork’s filing will give it protection from its creditors and landlords as it restructures its vast debts.

Based on its latest share price, WeWork is now worth less than $50m.

The bankruptcy will affect the company’s business in the US and Canada. The firm said its co-working spaces remained open and operational, including in the UK.

In an email to tenants in London seen by the BBC, the firm said it remained “fully committed” to providing its services and planned to remain “in the vast majority of our buildings”.

“We are committed to communicating with members first and early should we foresee potential changes,” it added.

The BBC recently reported that WeWork was shuttering at least one office on the capital’s South Bank as it grapples with its finances.

On Tuesday, one tenant in the UK told the BBC it was “certainly considering our options and looking at other co-working spaces”.

Paul Frampton-Calero, global president at consulting business Control v Exposed, said the firm’s 30 staff spread across multiple cities enjoy the flexibility, larger meeting rooms and events at WeWork.

However, he said if WeWork starts cutting back on members’ perks and events to save money, it risks losing its tenants to competitors.

“The challenge for WeWork is that there are now a multitude of alternatives so the early differentiation they relied on is no longer a strength,” said said Mr Frampton-Calero.

“Even if they continue trading for a period, I’m sure many businesses are already weighing up their options so I’d expect them to see an increase in churn.”

As of the end of June, the company had more than 700 sites around the world and about 730,000 members.

WeWork, which is loss-making, has billions of dollars in liabilities. In a statement late on Monday, it said that bankruptcy protection would allow it to “further rationalise its commercial office lease portfolio” while trying to ensure continuity for its users.

David Tolley, WeWork’s chief executive, said he was “deeply grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and expedite this process through the restructuring support agreement”.

WeWork, which was founded in 2010 and was led by the colourful Adam Neumann, leases office spaces where individuals and companies can rent and share space on a short-term basis. It became known for offering free-flowing alcohol in its offices as well as bright and relaxed decor.

Demand for the firm’s shared office spaces was hit after a disastrous 2019 effort to raise money in a public listing that hurt its reputation and led to the ousting of Mr Neumann.

That was swiftly followed by the pandemic which led to many office closures around the world, with people having to work from home.

In the first half of this year, WeWork lost more than $1bn, weighed down by the expense of operating its offices, as well as other costs.

Dealing with the hangover of acting like a big tech business, the company has been scrambling to sell off parts of its business and pushing to shut locations or renegotiate the terms of long-term leases and debts.

The company’s massive losses and insider dealings have been well-covered by the media – including in the Apple TV Series WeCrashed, starring Anne Hathaway and Jared Leto as Rebekah and Adam Neumann.

It featured several scenes depicting the hard-partying habits of its charismatic co-founder as he built the symbol of “office cool” out from one property in New York City.

Potential investors also questioned the links between Mr Neumann’s personal finances and WeWork, as well as his decision to expand WeWork into areas of personal interest, like a surf park business.

Last month, as discussions with landlords and financiers intensified, WeWork told investors it was not making payments on its loans.

Major shareholder SoftBank, a Japanese technology conglomerate, has pumped tens of billions of dollars into WeWork as it continued to lose money.

As anticipation of a bankruptcy filing emerged, Mr Neumann said the fall of WeWork was “disappointing”.

“It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before,” Mr Neumann said.

“I believe that, with the right strategy and team, a reorganisation will enable WeWork to emerge successfully,” he added.

— Reports /TrainViral/