Almost exactly two years after going public via SPAC, WeWork, the struggling co-working start-up that once held a valuation as high as $47 billion, filed for Chapter 11 bankruptcy protection in New Jersey federal court Monday, having, as Wolf Richter reports, spent its entire life burning huge amounts of cash raised from investors – a total of $13.8 billion raised in 22 rounds, much of it from SoftBank and SoftBank’s Vision fund.
In a press release, the company said it struck a "Restructuring Support Agreement" with creditors to "drastically" reduce the company's "existing funded debt and expedite the restructuring process."
The bankruptcy is limited to only WeWork's locations in the US and Canada, the company said. It reported liabilities ranging between $10 billion to $50 billion.
"Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet," WeWork CEO David Tolley said in a press release.
Tolley continued, "I am 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."
In recent months, WeWork provided numerous signals of its imminent demise.
The first was in August, when it stated in a 10-Q filing that "substantial doubt exists about the company's ability to continue as a going concern."
As the company hemorrhaged cash and liquidity was running thin, Tolley said in September that the company "would seek to negotiate terms with our landlords" and "part of these negotiations, we expect to exit unfit and underperforming locations and to reinvest in our strongest assets as we continuously improve our product."
Then, in early October, WeWork skipped interest payments totaling $95 million on five of its bonds, which triggered a 30-day grace period.
As of June, the company was leasing 20 million square feet of office space, more than any other company in the US. This also comes as the office market is in a severe downturn due to remote and hybrid work trends, plus companies are panic exiting imploding progressive metro cities for safer areas.
In 2019, WeWork was valued at $47 billion in a round led by Masayoshi Son's SoftBank. The company attempted to go public but miserably failed.
Despite the bankruptcy, Financial Times quoted WeWork as saying its office spaces were still "open and operational."
Adam Neumann, the founder of WeWork, issued a statement on Monday ahead of the bankruptcy that said the impending news was "disappointing." Remember, Neumann once said he aspired to be the world's first trillionaire.
WeWork might come out of bankruptcy with a much smaller office footprint across North America. This scenario could spell trouble for the already struggling office space market, potentially unleashing a wave of additional supply.
