Aug 9 (Reuters) - WeWork (WE.N) shares approached zero on Wednesday after the one-time startup darling warned it could go bankrupt in a stunning reversal of fortune for a company that was once privately valued at $47 billion.

The SoftBank-backed company has been in turmoil ever since its plans to go public in 2019 imploded after investors recoiled at its hefty losses, corporate governance lapses and the management style of then founder-CEO Adam Neumann.

WeWork's woes did not abate in subsequent years. It finally managed to go public in 2021 at a much-reduced valuation, but it has never turned a profit. Its major backer, Japanese conglomerate SoftBank, sunk tens of billions to prop up the startup, but the company has continued to lose money.

"WeWork was perhaps the most overhyped startup of recent years," said Steve Clayton, head of equity funds at Hargreaves Lansdown

A sign marks a WeWork location in Boston, Massachusetts, U.S., August 14, 2023.

WeWork's Business Model P3

WeWork's Business Model P4

Why WeWork's Business Model Is Risky P2-WSJ

Sam Zellweighs in on WeWork's office-sharing business model

WeWork bankruptcy: One of the biggest startup failures of all time, and venture capitalists haven't learned a thing.

 

• WeWork could file for bankruptcy protection from creditors next week, WSJ reported.

• WeWork, backed by Softbank and other top VC firms, was once worth $47 billion.

• Venture capitalists haven't learned a thing from WeWork's collapse.

WeWork just isn't working anymore, and the venture capitalists who backed the company when it was a high-flying startup haven't learned a thing from its disaster.

https://www.businessinsider.com/wework-bankruptcy-biggest-startup-failures-ever-vcs-havent-learned-2023-11 

WeWork could file for chapter 11 bankruptcy protection from creditors as early as next week, The Wall Street Journal reported. "We do not comment on speculation," a spokesperson for the company told Insider.

WeWork's already struggling stock, which was delisted from the New York Stock Exchange in August, plunged 50% on Wednesday, valuing the real-estate leasing operation at about $60 million.

In 2019, prior to a disastrous attempt to go public that resulted in the exodus of flamboyant controversial founder Adam Neumann, WeWork was valued at $47 billion. That's $46.94 billion in value over four years vanishing like a sand sculpture left in the wind.

In 2021, the company briefly looked like its fortunes could turn around. It was acquired by BowX, a blank-check special-purpose-acquisition company from Vivek Ranadivé, the founder of the software company Tibco who is perhaps better known as a former owner of the Golden State Warriors and, more recently, the Sacramento Kings. WeWork's valuation at that time was $9 billion, CNBC reported.

But WeWork crawled into 2023 so loaded with debt that it couldn't find its footing. In the spring, it struck deals to restructure debt, cutting obligations by about $1.5 billion, and extending the due dates of other notes in an attempt to preserve cash, Reuters reported. This was after it closed 40 locations in late 2022.

Last month, WeWork missed some interest payments, and rating agency Fitch warned that the company was still burning cash. "Fitch expects the cash burn to persist through 2023, and it is uncertain if improvements will be soon enough to avoid default," the agency said in early October.

When a $47 billion startup shrivels so drastically, who gets hurt? The investors. In this case, Softbank has suffered the most by far. Its Vision Fund was the largest shareholder of WeWork earlier this year. Softbank has been in a world of hurt over WeWork — and other missteps — for years now.

Other venture capitalists were exposed earlier this year, too, although they may have sold their holdings more recently. Even if they did, the stock had already slumped significantly.

In the early spring, Benchmark still held more than 20 million shares, or nearly 3% of the company. In August, it sold millions of shares, but at prices ranging from 18.5 cents to 23 cents, according to an SEC filing. In the spring, Insight Partners had 13 million shares, or just under 2%, according to regulatory filings around that time, although it may have also sold shares since then.

Then there's Neumann, who owned over 68 million shares of common stock and virtually all its Class C stock — nearly 20 million shares — earlier this year.

While WeWork puts egg on the faces of Benchmark and Insight, it is ultimately only a speck amid what has been mostly enviable performances year after year. For instance, Benchmark had a big stake in Amazon's $3.9 billion purchase of One Medical, one of the few splashy acquisitions of last year. And Insight is known for its investment in winners like Databricks and SentinelOne.

As for Neumann, while his WeWork holdings suffered greatly in 2023, he has already been redeemed Silicon Valley style. He's back with a new startup that raised $350 million from the VC giant Andreessen Horowitz in August 2022 — its biggest check ever — and is on the tech-speaker circuit.

Staggering as it might seem to blow away nearly $47 billion dollars, with those kinds of repercussions, WeWork isn't a warning for most of the venture capital community. It's just a stretch and a yawn.

Read the original article on Business Insider

 

The Crann an Óir sculpture re-instated at the Central Plaza in Dublin.

WeWork's expensive gamble is summed up by its plans in Dublin's Central Plaza

https://www.thejournal.ie/we-work-dublin-6214067-Nov2023/

IT ALL LOOKED so bright in June 2018.

The year before, WeWork had raised $760 million, taking its valuation to $21 billion. This would more than double to $47 billion just months later.

Investors were euphoric about the potential of the company – which rents out buildings and then leases them out again, normally as trendy coworking spaces – to revolutionise the modern office.

From an Irish perspective, the company had just been announced as the anchor tenant to the Central Plaza scheme, which centred on redeveloping the old Central Bank building on Dame Street in Dublin city centre.

WeWork was to take over almost the entirety of the nine-storey old building. It was hoped this would create a beacon for Ireland’s modern economy – a huge, modern coworking hub in the heart of the capital, where the best and brightest would mix and innovate.

Anyone with a passing familiarity of WeWork knows where this story is going – downwards.

The US firm is deep in crisis, with reports earlier this week revealing it intends to file for bankruptcy in an effort to restructure its debts.

Shares have tanked. The price of the company’s stock has more than halved since the bankruptcy reports came to light and is down by about 99% in the last year alone.

Weighed down by a combination of factors – from a massive debt pile to mounting losses to the increasing prevalence of work from home – WeWork is now in serious danger of going out of business.

WeWork’s strategy was inherently risky. Essentially acting as a middleman between a landlord and a tenant, the company relied on marketing itself as a kind of tech firm to get investors excited.

There is some merit to its model. Giving tenants the option of just leasing small co-working spaces, rather than entire office floors or buildings, can be useful for many small traders or startups.

The problem was how WeWork over-extended itself. Borrowing massive amounts of money, the firm aggressively expanded, taking out long-term leases in prime offices around the world.

It did the same in Dublin, becoming one of the largest players in the capital’s commercial property market.

As well as the office space at Central Plaza, the company has a presence at Harcourt Road and the Charlemont Exchange near the Grand Canal and the 2 Dublin Landings building in the docklands.

While it was banking on the co-working model delivering full buildings, since the pandemic, occupancy at its offices has hovered at around 75%.

While WeWork isn’t done for yet, the future looks bleak.

This is where Ireland, or more specifically, Dublin, comes in. As the company’s struggles could hardly have come at a worse time for the capital’s commercial property market.

Although not to the same extent, many commercial property firms are suffering from similar problems to WeWork.

High interest rates and climbing levels of office vacancies have dented the sector. In 2018, when WeWork agreed to take over the old Central Bank building, prime new offices were being snapped up before they were even built.

Now, less than a third of offices under construction are pre-let and it is predicted the vacancy rate in the capital could hit around 17% by the end of the year. The major problem seems to be a simple one of oversupply, exacerbated by many tech firms cutting their headcount last year and landlords being slow to cut rents.

The collapse of a major player in the space would be another body blow for the market.

Central Plaza

The Central Plaza project could be viewed as symptomatic of WeWork’s decline – big plans which have proven tough to execute.

When the firm was announced as the anchor tenant in June 2018, it was envisaged it would be in the building before the end of 2019. While Covid happened, the opening date was pushed back multiple times even after the pandemic had eased.

WeWork signalled earlier this year that it wanted to renegotiate nearly all of its leases around the world, as many of these were agreed at high prices in a pre-Covid world.

Despite this, as recently as September, Hines, the developer behind Central Plaza, said WeWork was on course to open in Central Plaza in May 2024.

Even if WeWork does get Central Plaza up and running as planned, occupancy could well prove to be a major challenge.

With high commercial vacancy rates generally, several analysts have predicted somewhat of an easing of demand for coworking spaces, especially as work from home has stuck around.

With prices starting from €45 a day for a hot-desk, it isn’t too far-fetched to think WeWork may struggle to fill the building. Not a pleasant option to consider for a company in need of cash as fast as WeWork.

Dublin’s office market is predicted to bottom around the middle of 2024 – unfortunately for WeWork, right around when its Central Plaza floors are set to finally open. If the company is still even trading by then.

For both WeWork and Dublin’s office market more generally, things could well get worse before they get better.

 

Dissasociated Follower

Great to see this company going under. We let far too many of these hyper greedy capitalists unconditionally meddle in our affairs.

K P

@Dissasociated Follower: darn capitalists creating all that economic value!! How dare they!!

Niall Whyte11y

@Dissasociated Follower: cos communism/socialism has worked out so well for the countries where its the economic model.

Mark Callinan6m

Rebranding coming….. “It won’t work”

 Dave Hammond12y @Mark Callinan:

or for 2024 “ please for the love of god will ya come to work ffs ”

Mick Duvanny6m

@Mark Callinan: The business model was a good idea but ultimately is a failure. No amount of restructuring will fix it

Noncinbo

Exactly what’s wrong with our economy, company acting as middle man, completely unneeded in most situations, being prioritised by government, paying low tax in Ireland, restrain the building of some of those offices and build apartments..

ItWasLikeThatWhenIGotHere @Noncinbo: A bit like Enron.

(Does anyone remember Enron?)

Enron started out as an electricity supplier, then discovered they could corner the market by “buying” up the output of other electricity suppliers and, when they had the supply locked in, charge what they wanted to sell it on.

(Shareholder) Capitalism 101.

Of course, Enron were also very naughty with certain accounting practices.

Temp Stuff

€45 per day for a hotdesk … good luck finding mugs

Eoin O Shea12y

@Temp Stuff: it’s actually €25 per day. I’m heading to Charlemont Street tomorrow. While that’ll be my first time in a WeWork, they have an on-site barista (free) and apparently beers from 3pm everyday (free). Easily see why they going under, you could make your €25 back no prob!

Alison Hughes

@Temp Stuff: €45????….where are you getting that figure?

Áine G6m

It never worked.

ItWasLikeThatWhenIGotHere

I don’t think WeWork is filing for bankruptcy.

I think it is filing for bankruptcy protection, known as Chapter 11 in the US.

I think this is somewhat equivalent to our own examinership.

Michael Martin should know on his trip to China that he is representing Ireland and not the EU. He needs to think for Ireland and not be repeating whatever Ursula Von Der Lying says. Are we not a sovereign country anymore or what.

Dave Hammond12y

@: agree but you have to understand that precisely because the opinion polls are showing they are likely to get pasted in Irish elections so they are pushing their international credentials for to take the stage eu political gravy train – I mean to represent us as MEP in future – it’s so blatantly obvious watch the number of times they all appear on RTE news stories on anything , any war , any geo political distraction that doesn’t involve answering hard questions about housing , homeless , poor infrastructure , health “crisis” – or any actual IRISH problems , border management , international welfare abuse , prisons , criminal justice the list is endless , but no we have to listen to their BS hot air pontificating about Gaza ffs

David Cotter

Why do investors keep failing for this crap…bitcoin is next

Alison Hughes

@David Cotter: I’d say you’re a huge business expert!

Pj Browne10y

Big egos what can you not do at your kitchen table with a laptop on good WiFi.why would anyone starting up waste at least €45 a day to rent a hot desk

om Dillon

@Pj Browne: Depends on the size of the kitchen, depends on the size of the table, depends on the number of people vying for your attention, depends on the hardware available to you, depends on the networking opportunities, depends on the separation of work and home, depends on the type of work …

Philip Cullen10y

Surely the logical thing to do is convert some of the floors in these empty buildings into apartments?

Bat Boy

Imagine if the central bank and many other office sites had been designated for residential use. Offices sit empty (can be assumed more to come), this will lead to the further demise of the city. Meanwhile so many cannot find somewhere to live.

Jason Walsh3y

Correct me if I’m wrong but didn’t they offer shorter leases then their competition. That was the risky part when demand dropped.

 This fellas articles are always interesting.

 

The Rise and Fall of WeWork | The New Yorker

 https://www.newyorker.com/culture/culture-desk/the-rise-and-fall-of-wework 

Culture Desk

 

Iwas in a wine bar the other day, having drinks with a couple of WeWork employees, when a waiter arrived to take our order. He’d overhead some of our conversation. “Are you talking about Adam Neumann?” he asked. “I know that dude! I grew up with his nephew. He used to smoke weed with us.” Somehow, this felt natural. Everyone in New York seemed to be talking about Neumann, the barefooted prophet of the unicorn era, and about WeWork, the freelancer’s desk-sharing concern that he somehow transformed into the city’s biggest private office tenant, with outposts in thirty-two countries and a private-market valuation bigger than the G.D.P. of Serbia. It all crumpled in September, after WeWork’s I.P.O. failed. Neumann was pushed out—in a deal that made him a billionaire—and the company was taken over by the Japanese conglomerate SoftBank, its largest investor, at a valuation well below the thirteen billion dollars that the firm has now put into it. We obsessed over the story, I suppose, because it was a train wreck—and a relatively harmless one, compared with the ongoing catastrophe two hundred miles south, in Washington, D.C. The Trump Administration is caging migrant children and enabling the deaths of Kurdish civilians. WeWork’s chief victims were SoftBank and the Saudi sovereign wealth fund, one of SoftBank’s biggest backers—and, of course, the company’s twelve thousand employees. But they didn’t want your pity.

“In retrospect, there’s no way this could have worked,” one employee, a software engineer, told me, sounding weary. He brought up the marketing expert Scott Galloway, who has compared cheap capital to a drug. “People were high. There’s not a human being in America who doesn’t look at the number forty-seven billion dollars”—WeWork’s valuation in January—“and not get goosebumps. It seems insane now, but at the time it made so much sense.”

I spoke to about a half-dozen WeWorkers, a sampling that was heavily tilted toward the architecture and building sides of the business—the company’s “core offering.” (The employees asked to be anonymous, to shield them from repercussions at work.) They used words like “sombre” and “uncertain” to describe the mood at the company. A new chairman, Marcelo Claure, had arrived from SoftBank and made a speech promising “bumpy roads” ahead. Early-stage projects had been put on hold. Many employees were wrapping up projects that had already been built, or slipping away for job interviews, or practicing self-care. A project manager whom I met for coffee said, “I’m going to yoga after this.”

Layoffs hadn’t been announced yet, but signs of belt-tightening were visible: free breakfasts had been reduced at the company’s office in the Financial District. Meditation classes had been pared back, from three per week to one. “I talked to the instructor,” one of my wine-bar companions, who works in real-estate development, said. “She was fighting to keep one class a week going, and not even for her own pocketbook. She was just, like, ‘Listen, I’m teaching three full classes every week. These employees really need it.’ ”

All of the employees I spoke to described a similar emotional trajectory. The first stage was romance. “Forget forty-seven billion dollars. I don’t know of a single architecture office worth one billion dollars,” another worker at the wine bar, a designer, said. “That was promising.” The company’s proposition was as intoxicating as it was vague. “I bought into it. I’ll admit it,” he said. The idea was “this new ‘office of the future.’ That, if you make work an enjoyable place to come to, you can probably improve productivity.” An architect said that she’d initially been skeptical of the company but was won over during her job interview, when she visited WeWork’s Chelsea location, its showpiece. “I have to say, the vibe there is magnetic,” she said. There were endless seating options: booths, extra-large couches, café-style tables. A barista whipped up lattes with vegan milk, and the central pantry offered wine, beer, and kombucha on tap. “It’s bright and bustling,” she went on. “People are chatting in small groups, or having coffee and working on a laptop. You’re convinced that they are busy and doing things well. It’s interesting, because that’s what they were selling: this energy, this magnetic, productive buzz.” The WeWorkers themselves had a specific look, which spoke of the excellent paychecks. The women favored tight jeans and motorcycle jackets. The men tended to be “sales bros,” the architect said. “The kind of guy who walks around with an Apple EarPod in his ear, talking to someone.”

Then came a literal honeymoon: a festival known as Summer Camp, which was mandatory for new employees. At the wine bar, my two drinking companions thought back to the summer of 2018, shortly after they’d been hired. SoftBank had just provided the company with a billion-dollar cash infusion. Eight thousand WeWorkers were whisked to a field outside of London, where they camped in tents for three days. Lorde performed, and the New Age guru Deepak Chopra led a meditation. The two employees had been tent buddies, and they’d experienced moments of what they called “foreshadowing.” “I think we crunched the numbers on the plane and were, like, ‘O.K., this is twenty-five hundred dollars a head just for the flights,’ ” the designer said. “On one hand, I was, like, ‘Wow, this is amazing.’ Most companies I’ve worked at, I’ve been lucky if they’d buy me dinner. On the other hand, from a business perspective, there were some red flags there.”

It rained on the first night, and the WeWorkers huddled under a tent, listening to Neumann speak from the stage. He broke into a televangelist bit, walking out into the crowd and pointing to random people, asking them to describe their “superpower.” The designer recalled, “People were raising their hands, like, ‘Pick me! Pick me!’ ” Some WeWorkers shared personal stories, and got emotional. “I’m like sitting there, like, Oh, my God. I don’t know how to feel about this.” The development worker, who is gay, said that he’d felt a twinge of discomfort when Rebekah Neumann, Adam’s wife, delivered a tearful speech, in which she declared, “A big part of being a woman is to help men [like Adam] manifest their calling in life.” (The festival also included a panel event in which the Neumanns talked about the success of their relationship.) “I was kind of grossed out by this whole religious, heteronormative undertone to everything,” he said. But he was having too much fun to worry about it. And he figured that there was more to the company’s leadership than the Neumanns’ theatrics might suggest. “There was always this assumption that, behind Adam, there was someone intelligent—a group of people—who were watching and making the practical, financial decisions,” he said. “That someone was taking care of it.”

Next came the middle period: a blur of frantic work.WeWork was in the business of delivering digital-style growth in the very analog sphere of commercial real estate. For the employees, this meant building lots of office spaces very, very fast. “It was chaos,” an architectural designer, who described herself as logistics-oriented, said. Design teams were huge. Trying to get everyone on the same page “was like herding cats,” she said. WeWork’s salespeople were not trained architects, and they “were always promising insane things like ‘We’ll get it done by October!’ And it’s July.” In the wine bar, the development worker said that, by January, 2018, “It felt like five years of your life had gone by. We were all a bit more jaded.”

The next stage was disillusionment. For the WeWorkers I spoke with, the turning point was at the company’s Global Summit, which took place in the Los Angeles Convention Center and featured appearances by the figure skater Adam Rippon and the twenty-one-year-old actor Jaden Smith. During Neumann’s keynote speech, he brought up his plan to create a floating WeWork, called WeSail, and to launch a WeBank. The architectural designer told me, “That made me very, very nervous.” One event was an onstage interview, conducted by Rebekah Neumann, with the Red Hot Chili Peppers front man, Anthony Kiedis. The event was mandatory, and thousands of WeWork employees filled the Convention Center and listened to Kiedis discuss his lifelong battle with heroin and cocaine addictions. The interview started to go off the rails. “At some point, it becomes clear that Rebekah has decided that she’s going to turn it into a sort of Dr. Phil session,” the designer recalled. She began pressing Kiedis on his recovery process and urging a solution. “She was asking, ‘Have you found your soul mate yet? You’ll be happy when you find your soul mate.’ ” Kiedis didn’t seem very receptive to the idea. The audience squirmed. “That was when it hit me,” the development worker said. There was no secret team of shadow executives. “There wasn’t anyone else running the company. It was just Adam and his wife.”