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London Tech Week

Softbank-backed co-working giant WeWork to file for bankruptcy over piling losses

WeWork
Picture credits: HJBC/DepositPhotos

Flexible workspace giant WeWork is reportedly filing for bankruptcy as early as next week. It is claimed that the Softbank-backed company struggles with a massive debt pile and hefty losses. 

As per the Wall Street Journal, the New York-based co-working firm was successful initially with a valuation of $47 billion in 2019, but then things went bad. A mismanaged IPO attempt and troubles related to its co-working model during the COVID-19 pandemic set the ball rolling toward a downhill path.

The value of WeWork’s shares dropped by 32% during after-hours trading when the news was initially broke out. Overall, they have plummeted by approximately 96% throughout the year.

Piling debts and losses

Though WeWork is yet to officially comment on this report, earlier this week, the company entered into an agreement with creditors for temporary postponement of payments for some of its debt as the grace period is nearing an end. The long-term debt that the company owes accounts for $2.9 billion as of June 2023, and over $13 billion in long-term leases. 

Last month, WeWork missed interest payments to its bondholders, and was granted 30 days to come up with those payments, according to a securities filing. 

The company’s net loss narrowed to $349 million in the second quarter from $577 million a year ago, but it still burned through $646 million in cash in the first six months of the year. As of the end of June, the company had $205 million cash in hand, according to Reuters. With these losses, WeWork has never turned profitable.

Massive network of spaces

WeWork was founded by Adam Neumann, Rebekah Keith, and Miguel McKelvey in 2010.  As of June 30, its real estate portfolio consisted of 777 locations across 39 countries, supporting approximately 906,000 workstations and 653,000 physical memberships.

Meanwhile, the Japanese conglomerate SoftBank, which is one of the major investor in WeWork, has sunk tens of billions to prop up the startup, but the company has continued to lose money. To date, WeWork has raised over $22 billion in funding from investors such as SoftBank, Insight Partners, BlackRock and Goldman Sachs.

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