The public-listed co-working space provider WeWork is reportedly preparing to file for Chapter 11 bankruptcy amidst significant debts and substantial losses. After the Wall Street Journal broke the news, the company’s shares plummeted 35%, marking a staggering 96% drop this year. The potential bankruptcy filing is said to be in New Jersey, as confirmed by Reuters, citing informed sources.
Responding to these reports, a representative from WeWork stated, “We do not comment on speculation.”
Earlier the same day, WeWork announced an agreement with creditors for a temporary delay in some debt payments, indicating financial strain. By the end of June, the company had accumulated a long-term debt of $2.9 billion and was committed to over $13 billion in long-term leases. This comes at a time when the commercial real estate sector faces challenges due to escalating borrowing costs.
If WeWork proceeds with the bankruptcy, it would be a dramatic turn for a company that had a $47 billion valuation just in 2019, casting a shadow over its major investor, SoftBank. The company’s journey has been tumultuous, especially after its initial attempt to go public in 2019 faced severe skepticism from investors. Concerns centered around its business approach of securing long-term leases and subleasing them short-term, coupled with its significant losses.
While WeWork did manage to go public in 2021, it was at a greatly diminished valuation. SoftBank, its primary supporter, invested billions to keep the company afloat, but financial losses persisted. This past August, WeWork expressed “significant doubt” about its sustainability, further emphasized by the departure of several top executives, including CEO Sandeep Mathrani, throughout the year.
