Troubled coworking startup WeWork filed for bankruptcy in US federal court on Monday (6).
The bankruptcy announcement caps a major downturn for the once-booming SoftBank-backed company, which was valued at about $47 billion at its peak.
At another time, a much-loved tech unicorn promised to revolutionize the future of office work – thanks, among other things, to liberated craft beer.
However, a storm of factors caused WeWork to collapse after a failed attempt at an IPO in 2019.
At the time, documentation 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 made WeWork’s culture the subject of widespread media coverage, was ousted in 2019 under pressure from investors. Neumann even received a hefty severance package when he left the company.
WeWork went public about two years later at a much reduced valuation of around $9 billion.
But in 2021, the market sentiment and easy access to capital that helped sustain much of the startup world before the pandemic has started to change.
Although WeWork presents itself as a technology company, some critics have pointed out that its core business is not technology but rather real estate, leasing space in office buildings to be upgraded and subletting to startups, freelancers as well as large and small businesses.
Even after its IPO, the company struggled to turn its fortunes around. The flexible workspace provider was facing 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 on which the company’s foundations were built. WeWork were built.
However, increased competition in coworking spaces, rising interest rates and macroeconomic uncertainty have also clouded WeWork’s attempts to save itself in recent years.
WeWork shares have fallen about 98% in 2023 alone. In May, WeWork announced a leadership change with the departure of its chairman and CEO, Sandeep Mathrani, an executive at real estate that investors hoped would save the company.
WeWork board member David Tolley assumed the role of interim CEO and was officially named CEO in October.
Meanwhile, in August, the company said it had “substantial doubts” about its ability to remain in business over the next year as losses and debt continued to mount.