The Office-sharing company WeWork has filed for Chapter 11 bankruptcy protection in New Jersey federal court Monday, saying that it had entered into agreements with the vast majority of its secured note holders and that it intended to trim “non-operational” leases.
This money trouble only applies to WeWork locations in the U.S. and Canada. WeWork has a lot of debt, somewhere between $10 billion and $50 billion, according to their paperwork.
WeWork’s Recent Struggles
The CEO of WeWork, David Tolley, thanked the people who are lending them money to help them fix their financial situation. He said they will still invest in their products, services, and employees to support their community.
In the last few years, WeWork had a really big problem, and it’s one of the most significant business failures in recent U.S. history. Back in 2019, it was worth a lot of money, about $47 billion, thanks to an investment led by Masayoshi Son’s SoftBank. But five years ago, when they tried to go public, they couldn’t make it happen.
Things got even worse during the pandemic. Many companies stopped renting space from WeWork, and when the economy went downhill, even more businesses closed down, hurting WeWork even more.
In August, they said in a legal document that they might have to declare bankruptcy.
WeWork made a comeback in 2021 by teaming up with a special kind of company, but their value dropped by a lot, almost 98%. To avoid losing their spot on the New York Stock Exchange, they had to do something called a “reverse stock split” in mid-August. This means they combined a lot of their shares to make each one worth more than $1.
Before they stopped trading on Monday, WeWork’s shares had dropped to around 10 cents, and just before they were halted, they were trading at about 83 cents.
Former CEO Perspective and Current Developments
The former CEO and co-founder of WeWork, Adam Neumann, said he was disappointed about the situation. He mentioned that it’s been tough for him to watch from the sidelines since 2019 because WeWork hasn’t made the most of a product that’s even more relevant today. He believes that with the right plan and a good team, they can reorganize and make WeWork successful again.
Just in September, the company had mentioned that they were actively working to change their lease agreements and were confident about their future. They had around $16 billion in long-term lease commitments, according to securities filings.
WeWork rents a lot of office space in 777 different places all over the world, according to the documents they’ve submitted to regulators.
WeWork has hired Kirkland & Ellis and Cole Schotz as legal advisors to help them with legal matters. They’ve also brought in PJT Partners as their investment bank, with assistance from C Street Advisory Group and Alvarez & Marsal.
WeWork faces severe financial problems, seeking government assistance mainly in the U.S. and Canada, with debts ranging from $10 billion to $50 billion. CEO David Tolley remains committed.