This article is from the Australian Property Journal archive
WEWORK, once the poster child of the co-working office sector, could file for bankruptcy as early as next week.
The Wall Street Journal cited numerous sources with knowledge of the matter that WeWork – once valued at US$47 billion – was planning to seek Chapter 11 protection in New Jersey.
WeWork HAD missed interest payments owed to its bondholders on 2nd October, triggering a 30-day grace period in which it needed to make the payments, with failure to do so would be considered a default event. The company said it had struck an agreement with the bondholders to allow another seven days to negotiate with the stakeholders before a default is triggered.
The New York-based company, which attempted an aggressive global rollout that ultimately saw it haemorrhage money, had warned in August week there was “substantial doubt” over whether it could remain in business due to its losses and need for more cash to stay afloat.
Chapter 11 bankruptcy allows for a company to continue operating while a plan to repay debts is hammered out, and also allows for mechanisms such as getting out of expensive leases. At the end of June it had US$13 billion of long-term lease obligations.
Interim CEO David Tolley had said in August the company’s transformation “continues apace”, with a focus on member retention and growth, “doubling down on our real estate portfolio optimisation efforts”, and reducing operating costs, adding that WeWork had struggled from “excess supply in commercial real estate” and “softer demand”, with economic volatility causing tenants to end their leases.
WeWork was valued at US$47 billion in 2019 before then-CEO and founder, Adam Newmann’s erratic behaviour and spending started raising concerns, and a public float failed, sending its value plummeting. It was bailed out by Japanese investment group SoftBank, which has sunk tens of billions of dollars in the company.
WeWork lost $349 million in the June quarter – and that result was a $238 million improvement on the first three months of the year. After finally going public in October 2021, its share price has been wiped – and cut nearly in half yesterday on the back of the reports – to US$1.22, having sat at a 52-week high of US$130.80.
WeWork had 777 locations in 39 countries, according to the company, at the end of June.
Meanwhile, its rival IWG, which operates the Regus and Spaces brands, reported record revenues and more than a doubling of operating profits in the first half of 2023 to £94 million, a period in which it signed up for 400 new locations.
Local flexible workspace provider The Commons has plans to open another five locations in the next 12 months, after reporting record revenue and a tidy profit.
