Workspace-sharing company, WeWork, filed for Chapter 11 bankruptcy protection in the United States and Canada on Nov. 6, just months after warning of “substantial doubt” that it would be able to stay in business over the next year.
WeWork, founded in 2010 and once valued at $47 billion on the private market during its peak, said the Chapter 11 bankruptcy filed in New Jersey was part of a “comprehensive reorganization to strengthen its capital structure and financial performance and best position the company for future success.”
The New York-based firm entered a restructuring support agreement with “strong support” from its key stakeholders, representing approximately 92 percent of its secured noteholders, to “drastically reduce” its existing funded debt and expedite the restructuring process, according to a statement.
“During this period, WeWork will further rationalize its commercial office lease portfolio while focusing on business continuity and delivering best-in-class services to its members, as global operations are expected to continue as usual,” the firm said.
The co-working space operator added that it “has a deliberate and value-maximizing lease rejection plan that is expected to position the company for operational and financial success.”
As part of Monday’s filing, WeWork will request the ability to reject the leases of certain, largely non-operational, locations, officials said.
The bankruptcy filing does not affect locations and franchises outside of the United States and Canada, according to WeWork.
WeWork reshaped the office sector globally through its business model of leasing spaces in office buildings to its members, allowing business professionals and freelancers to rent out the workspace for various amounts of time.
Covid, Inflation Impact FirmHowever, the company has been unable to turn over a profit since going public in October 2021 via a blank-check company and struggled with the workplace trend toward working from home during the COVID-19 pandemic.
Additionally, many of its customers, including startups and smaller businesses, were forced to slash their spending amid soaring inflation, further adding to WeWork’s woes.
“As a result of the Company’s losses and projected cash needs, combined with increased member churn and current liquidity levels, substantial doubt exists about the Company’s ability to continue as a going concern,” the firm wrote in its second-quarter earnings release.
WeWork also reported a net loss of $397 million in the second quarter, down slightly from the same three months a year prior when it reported a loss of $635 million but still a significant amount. For the first six months ending in June, the company reported a net loss of $696 million, marking a slight improvement from the net loss of $1.14 billion in the same period in 2022.
Shares for WeWork have dropped down roughly 98 percent this year alone.
Despite the bankruptcy filing, David Tolley, CEO of WeWork, cut a positive note Monday, noting that the co-working space operator has “a strong foundation, a dynamic business, and a bright future.”
The company also noted that most WeWorks would remain open for the foreseeable future and continue servicing existing members, vendors, partners, and other stakeholders.
“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet. We defined a new category of working, and these steps will enable us to remain the global leader in flexible work,” Mr. Tolley said.
“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,” he continued. “We remain committed to investing in our products, services, and world-class team of employees to support our community.”