WeWork has filed for bankruptcy in the US. The office space provider was once one of the most valuable US start-ups at $47 billion and also operates in Berlin and Frankfurt.
The office landlord WeWork has filed for bankruptcy in the USA. According to court documents, the once most valuable US start-up wants to seek restructuring under the procedure known as “Chapter 11”. The management wants to reposition WeWork and, among other things, reduce the amount of office space available. Lenders who are behind around 92 percent of WeWork’s debts had approved the plan, the company announced on Tuesday night.
The move into bankruptcy was already expected: Last week it was said that WeWork wanted to file for bankruptcy this week in order to get its debts under control. Last Tuesday, a 30-day period within which WeWork would have had to service promissory notes expired. WeWork would then have been officially declared insolvent. The company let the deadline pass, but negotiated a one-week extension.
Vastly overrated
WeWork was once valued at around $47 billion and is now only worth $44 million on the stock market. Thanks, among other things, to clever marketing by the founders, financiers helped WeWork achieve such a high overall rating at times. With this reputation, WeWork wanted to go public in 2019. Instead of the hoped-for triumph, there was a flop. The IPO was canceled.
The deeper insight into the business in the stock market prospectus caused large investors to avoid the loss-making company. In 2021, WeWork made it onto the stock market in a detour – by merging with a blank check company. A few years ago, WeWork was therefore seen as a cautionary tale for grossly overvalued US start-ups.
Softbank miscalculated
Behind WeWork is the Japanese tech investor SoftBank, for whom the debacle of the failed IPO was expensive. Softbank and its Vision investment fund, backed by Saudi Arabian money, had secured a 29 percent stake in WeWork for nine billion dollars. After the canceled IPO, Softbank raised another $9.5 billion to increase its stake to 80 percent and force out the controversial co-founder and boss Adam Neumann.
But even under the direction of Softbank, WeWork remained unlucky. During the corona pandemic, offices around the world emptied because people worked at home. Even after the pandemic subsided, WeWork struggled to fill office space. At the same time, rental costs for buildings had to be paid and debts had to be serviced.
Never made a profit
WeWork’s business idea, which was once considered to be profitable, is to rent office space with shared infrastructure to start-ups and entrepreneurs in so-called co-working spaces. According to the latest information, the company recently had 660 such locations in 119 cities around the world.
In Germany, WeWork is present in Berlin and Frankfurt, among others. In addition to the US bankruptcy filing, one was also filed in Canada. Locations outside of these two countries are not part of these procedures – nor are buildings operated by franchisees. WeWork has never been in the black.