Bloomberg News reports that WeWork, a flexible workspace service provider, filed for bankruptcy Monday. The company was plagued with surging debts and is incurring huge losses from customers who have become cost-conscious.
Once the Most Valuable Startup
WeWork is regarded as one of the most valuable startups in the United States, with a value amounting to $47 billion. The investors it courted include mainly the blue-chip ones. They are Benchmark, a venture capital company, SoftBank, and a major bank on Wall Street, namely, JPMorgan Chase.
WeWork – The Rise and the Fall
It all started with the flamboyant and extravagant anticipations of Masayoshi Son, the founder of SoftBank. The workspace service provider tried to launch an initial public offering (IPO) in 2019 under the chief executive Neumann. In this context, WeCompany, which is the parent company, spent several months on the preparation for the IPO.
The share sale that was proposed collapsed miserably when investors started harboring questions that were related to the company’s hefty losses. The investors also did not have faith in the management style of Neumann and questioned Neumann’s styles related to corporate governance.
By the time it was 2021, WeWork’s estimated value had plunged to $10 billion. Following this, the company merged in October of the same year with a blank check acquisition company.
A Television Series on WeWork
The rise and fall of WeWork was made into a television series with the title “WeCrashed.” Jared Leto as Neumann and Anne Hathaway as Rebekah, both Oscar winners, starred in the series.
Reasons for Seeking US Bankruptcy Protection
A few prominent reasons that caused them to file for bankruptcy include frequent cancellations from client agreements and contracts. Expensive leases and the trend of working from home were equally responsible for the company’s downfall. The company was grossly impacted during the COVID-19 pandemic when people started working from home. It’s at times like these when the expertise of chapter 7 lawyers becomes crucial, as they specialize in a type of bankruptcy that involves liquidation of assets to repay debts.
Bloomberg News reports that although the company tried hard to keep bankruptcy at bay by amending leases and restructuring the debts, it did not prove adequate in staving off bankruptcy.
As per the finding, the long-term lease obligations of WeWork towards the end of June were $13.3 billion. This proved to be a crippling experience for the company, especially after the Covid-19 catastrophe.
What Next for WeWork?
On Monday, WeWork revealed that as many as 92% of company lenders had agreed to change their secured debts into equity. WeWork would do the same as per a restructuring support agreement. This would help in wiping out approximately $3 billion in debt.
