WeWork, once among the world's most valuable start-ups and most-hyped industry disruptors, has just filed for bankruptcy.
At its peak, the co-working titan was valued at about $47 billion, and was viewed as the future of workplace collaboration and a darling of the start-up community.
However, the bumpy road to its rise and eventual downfall was no secret.
The National briefly charts what happened to WeWork and what comes next.
What is WeWork and who was behind it?
WeWork began as GreenDesk in 2008 in Brooklyn, and adopted its current name in 2010.
It provides co-working spaces and, according to its website, intends to build “a global community … constantly reimagining how the workplace can help everyone, from freelancers to Fortune 500s, be more motivated, productive and happy”.
Its founders are Adam Neumann and Miguel McKelvey.
Mr Neumann, an Israel-born businessman, gained prominence for his erratic behaviour and aspirations, including his goal of becoming the world's first trillionaire and “president of the world”, and plans to live forever and expand WeWork to Mars, as reported by the New York Times.
How did WeWork go bankrupt?
A series of missteps contributed to WeWork's downfall. Industry analysts have said in the past that Mr Neumann's business model was too expensive to operate and offered little profitability.
Japan's SoftBank Group, WeWork's biggest shareholder that would eventually become its owner, also set lofty expectations for the company. SoftBank's chief executive Masayoshi Son admitted to shareholders in June that he “fell in love” with WeWork.
But it is widely believed that it was in 2019 that WeWork's downfall began, coming to a head in a failed initial public offering early that year.
WeWork was legally renamed to We Company in the several months leading up to the planned IPO. But investors baulked at Mr Neumann's behaviour, the company's grandiose business expectations and sizeable losses, as well as the general uncertainty of its direction, leading to the listing being called off.
The Covid-19 pandemic then dealt a severe blow to the office space market worldwide.
In October 2021, WeWork did manage to finally float its shares through a merger with a special purpose acquisition company, also known as blank-cheque company.
However, the company has struggled as demand for working space continues to tighten. The office space market in big cities is at risk of losing about $800 billion by 2030 as vacancies rise due to people opting for remote or flexible working arrangements, an earlier McKinsey & Co study showed.
While office attendance stabilised and recovered slightly after the Covid-19 pandemic, it remains 30 per cent below pre-pandemic levels, the global consultancy said.
The biggest sign of the impending bankruptcy came in August when WeWork's shares plummeted, falling to almost zero. Concerns about its poor financial performance and heavy debt prompted the company to admit that such a move was possible.
Rumours intensified last week and eventually culminated in the actual filing on Tuesday.
How did SoftBank become involved?
SoftBank, whose Vision Fund is the world's biggest technology-focused venture capital fund, invested $500 million in WeWork in July 2017 when it expanded into China. In August of the same year, WeWork raised $4.4 billion from the fund, valuing it at about $20 billion.
SoftBank threw a lifeline to the ailing company in October 2019 but, in return, Mr Neumann had to step down as chief executive.
The package included $5 billion in new financing and the acceleration of an already existing $1.5 billion commitment to rescue WeWork, which would have run out of cash as soon as November that year.
Mr Neumann was succeeded in 2020 by Sandeep Mathrani, who also stepped down in May 2023 and was replaced by David Tolley, who remains chief executive.
Tokyo-based SoftBank, which said it believes WeWork's move to file for bankruptcy was for the best, said on Tuesday that it would “continue to act in the best long-term interests of our investors”.
What comes next for WeWork offices and the co-working industry?
WeWork, which has listed $15 billion in assets, will continue operating as it works to raise finances.
More than 90 per cent of its lenders have agreed to a restructuring plan that will wipe out about $3 billion of debt.
The company said it would also file for bankruptcy in Canada but stressed that its operations outside North America would remain unaffected.
The National was not able to reach WeWork for comment.
WeWork's bankruptcy signals a re-evaluation of the flexible workspace sector, Oliver Baxter, founder of Dubai-based Workplace Maven, told The National.
This will open the robust and rapidly growing industry, particularly in the UAE, with many “alternative providers who can absorb the demand”, he said.
WeWork's situation can be seen as an opportunity for local entities that have established relationships with, for example, hotels, to diversify into business centres, Mr Baxter said.
“They could leverage their networks to offer flexible workspaces, capitalising on the short-term gap in the market. This strategy could appeal to businesses seeking agility and minimal capital expenditure during uncertain economic times.”
