WeWork has filed for bankruptcy in the US after years of struggle and failure to recover from the Covid-19 pandemic-induced losses.
The New York-based co-working company reported liabilities of $10bn to $50bn in a Chapter 11 petition filed in New Jersey.
The filing grants the once high-flying startup protection from creditors while it works out a way to reorganise its debts to have a fresh start.
The company had been struggling with a huge debt pile and massive losses incurred during the pandemic that led to its shares falling around 96 per cent this year. Shares of WeWork, which cost more than $400 two years ago, could be had on Monday for less than $1.
Trading in shares for the company was stopped on Monday.
"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," WeWork chief executive David Tolley said.
"Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet.
"We remain committed to investing in our products, services, and world-class team of employees to support our community," he added.
Japan's SoftBank stepped in to keep WeWork afloat, acquiring majority control over the company, but it quickly fell into trouble again.
In August WeWork said there was "substantial doubt" about its ability to continue to keep the company afloat. At the time it blamed the difficult US commercial property market and a weaker-than-expected performance.
In September, when WeWork announced plans to renegotiate nearly all of its leases, Mr Tolley noted that the company’s lease liabilities accounted for more than two-thirds of its operating expenses for the second quarter of this year – remaining “too high” and “dramatically out of step with current market conditions”.
Last month, WeWork skipped hefty interest payments, kicking off a 30-day grace period before an event of default, and last week, the company disclosed a forbearance agreement with bondholders that extended negotiations by one week prior to triggering a default.
The group has suffered a stark reversal of fortunes since being valued at $47bn in 2019 and revealing plans for a stock market listing that same year.
It went public in 2021, two years after the company's planned IPO failed following concerns about governance and growth prospects. The 2019 fiasco tainted the company's reputation, leading to the resignation of founder Adam Neumann as the chief executive.
Mr Neumann in a statement on Tuesday said the company’s bankruptcy declaration was “disappointing”.
“It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before.
“I believe that, with the right strategy and team, a reorganization will enable WeWork to emerge successfully,” he added.
Despite efforts to turn the company around since Mr Neumann's departure – including significant cuts to operating costs and rising revenue – WeWork has struggled in a commercial real estate market that has been rocked by the rising costs of borrowing money, as well as a shifting dynamic for millions of office workers now checking into their offices remotely.
The company reportedly has more than 700 locations around the world, including nearly 50 sites in the UK and Ireland.
It was founded by Mr Neumann and Miguel McKelvey back in 2010 with an aim to revolutionise workspaces and saw a meteoric rise in its early years.
Since Mr Neumann’s ouster, the company has seen several leadership changes. Sandeep Mathrani, who joined WeWork in 2020, stepped down in May, which then saw David Tolley taking over the chief executive's role.
Additional reporting by agencies
