WeWork, the startup backed by the Softbank group, declared bankruptcy on Tuesday and said it has signed a restructuring agreement with its stakeholders to reduce its existing funded debt.
WeWork Declared Bankruptcy
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David Tolley, the CEO of WeWork, has said in a statement that now is the time to pull our future aggressively, addressing our legacy leases and dramatically improving our balance sheet. He further said that all the affected members had also been informed by advance notice.
The company has listed its assets as $15.06 billion and liabilities of $18.66 billion as of 30 June with the New Jersey bankruptcy court. Let’s understand about the history of the company.
What is WeWork?
Adam Neumann and Miguel McKelvey founded the company in 2010 to provide a physical, social network to the new class of workers working as freelancers or working from home. The start-up was working by signing long-term lease agreements with office builders, cleaning them, and renting them out to freelancers or companies in need. The company attracted clients by offering them beer, hard kombucha, and chic interior design.
Under the supervision of Neumann, WeWork had seen a meteoric rise and has become one of the most successful US startups with a valuation of $47 billion. It attracted investments from SoftBank and venture capital firm Benchmark, as well as the backing of major Wall Street Banks, including JPMorgan Chase.
Covid-19 effect on WeWork
WeWork was working fine, but most of its clients were startups and small businesses, and during the Covid-19 pandemic, they moved to work from home. This caused the company to face some difficulties, and the other things that became a hindrance in the way of the company were its landlords. The company started with the motive of long-term lease agreements but started offering short-term and flexible leases, which has also become the reason for its downfall.
David Tolley has replaced Sandeep Mathrani as the CEO this year, who used to work as an investment banker and had already helped a satellite company to get out of financial trouble and bankruptcy in 2022. However, the company still has not managed to stop it from going into bankruptcy. The company has an extension of 7 days from its investors to repay interest.
This August, the company clarified that it knows how to stay in business. Still, the experts have to say something else: they believe that the financial issues started in the company long ago after it had been valued at $47 billion.
To rescue the company, Soft Bank from Japan has taken the majority of the shares of the company, and the company has also announced the suspension of some of its underperforming locations. As of 30 June, when the final property data was disclosed in the financial filings, WeWork had 777 locations in 39 countries.
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