The office space provider WeWork, once the most valuable start-up in the USA, has filed for bankruptcy. The company wants to reposition itself and, among other things, reduce its offering of office space. Backers behind around 92 percent of WeWork’s debt have agreed to the plan, the company said.
The idea behind WeWork is to rent office space with shared infrastructure to start-ups and entrepreneurs in so-called coworking 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. WeWork shares had already fallen drastically last week after… Wall Street Journal had reported insolvency plans. Now WeWork has actually filed for bankruptcy protection with creditor protection under Chapter 11 of the US Bankruptcy Code.
A few years ago, WeWork became a warning example for grossly overvalued US start-ups and has recently been in trouble again. As early as August, the company admitted “significant doubts” about its continued existence in view of its losses and expected cash requirements. In September, the first steps were taken to reduce the real estate portfolio. WeWork missed a debt payment due at the beginning of October. That started a 30-day countdown after which the company would have been officially declared insolvent. Last week, WeWork negotiated a one-week reprieve.
Thanks, among other things, to clever marketing by the founders, investors invested in WeWork, which at times reached a total valuation of up to $47 billion. With this reputation, WeWork wanted to go public in 2019 – but instead of a triumph, it turned into a flop. The deeper insight into the business in the stock market prospectus caused large investors to avoid the loss-making company.
The debacle at the time was particularly expensive for billionaire Masayoshi Son’s Japanese company Softbank. Softbank and its Vision investment fund, which was backed by Saudi Arabian money, had secured a 29 percent stake in WeWork for nine billion dollars. When the IPO collapsed in 2019, 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. In 2021, WeWork made it onto the stock exchange in a detour – by merging with a blank check company. After the recent price collapse, the value fell to a good $44 million.