Management problems and the pandemic Covid-19 were right to WeWork. The American company was to be the star value of a new office model, but it fell out of favor for several years and filed for bankruptcy on Monday.
“WeWork and certain of its subsidiaries have filed for Chapter 11 protection (Editor’s note: American bankruptcy law) and intend to file recognition proceedings in Canada under the Business Creditor Agreement Act,” the group announced in a statement. This procedure does not concern its subsidiaries outside these two countries, added the company, which believes that its “global operations will continue, as usual”.
Concretely, the chapter 11 procedure allows a company to renegotiate its debt with its creditors as well as to present a plan for reorganizing its activity while remaining under the protection of the law, for a period which can extend over several years. WeWork thus hopes to succeed in negotiating a “significant” reduction in its debt. The group hopes in particular, thanks to this procedure, to “end the leases of a certain number of locations” which do not bring it enough money, specifying that the owner companies “have already received notice”.
Teleworking as a coup de grace
WeWork had warned the American stock market watchdog (SEC) in early August that it feared for its survival. “There is substantial doubt about the company’s ability to continue as a going concern,” he said. The fate of WeWork, headquartered in New York, depends on “the successful execution of management’s plan to improve the company’s liquidity and profitability,” the company had said.
The company highlighted its financial losses, liquidity needs and the drop in the number of tenants. It explained that it had lost billions of dollars during the first six months of 2023 due to the drop in demand linked to poor economic conditions. The S&P rating agency announced on November 1 that it was lowering the group’s rating to the “partial default” category, after WeWork took stock of its problems with paying interest on its debt.
Once a start-up star, WeWork has raised billions of dollars from SoftBank Group. But the controversial management of its founder, Adam Neumann, worried investors, who ended up ousting him in 2019. Then the pandemic emptied the offices and the company failed to recover while demand for of professional premises has fallen with the rise of teleworking.
The fall of WeWork also greatly destabilized the Japanese group SoftBank Group and its Vision Fund, which had invested heavily in it, even forcing SoftBank to save it for the first time at great expense, in the process damaging its boss’ image as a visionary. , Masayoshi Son. WeWork was valued at up to $47 billion (around 44.7 billion euros) but its stock was only worth 80 cents (76 euro cents) Monday evening at the close of the New York Stock Exchange, for a market capitalization of 44.49 million dollars (42.3 million euros).