WeWork’s journey has had a lot of twists and turns since its inception in 2010. The year that the co-working gianted peak, 2019, the company was valued at $47 billion and surpassed JP Morgan Chase to become the largest office occupier in Manhattan. But things soon took a turn for the company after a failed IPO and the ousting of its charismatic co-founder and leader, Adam Neumann. By 2020, WeWork brought on a new CEO to right the ship, Sandeep Mathrani, a former executive at Brookfield Properties. The new leader immediately took measures to cut costs and set the company on a path to profitability, and WeWork finally went public through an SPAC merger in October 2021. Today, with its recent bankruptcy announcement, we look back at WeWork’s journey over the last 12 months.
In its Q2 earnings report, WeWork reported a 37 percent increase in revenue from a year earlier. Workers were increasingly returning to the office, and the company reported an uptick in occupancy at its locations. “Simply put, it’s growing revenue and continuing to cut expenses,” said Piper Sandler’s Alexander Goldfarb at the time. The positive news came about a month after the company launched its new space management software app in partnership with Yardi.
Later that month, after news broke about co-founder and former CEO Adam Neumann’s new multifamily initiative Flow, WeWork’s share price shot up more than 5 percent.
In its quarterly earnings report, the company reports losses of $629 million and announces it will close about 40 “underperforming” locations in the U.S. WeWork CEO Sandeep Mathrani doesn’t specify which locations would be closed in its Q3 earnings call, just that the locations picked were chosen because they didn’t meet design criteria, were obsolete, or were in a market with oversupply. The company’s membership numbers rose during the past quarter, and its occupancy rate increased, but it wasn’t as high as the flex space operator had hoped.
As the company struggles in its ongoing effort to become profitable, an increasing number of investors begin to hold short positions on WeWork’s publicly tradable shares.
WeWork’s fourth quarter 2022 earnings report shows the co-working firm’s revenue increased 18 percent from the same time period the year prior but net loss totaled $527 million for the quarter. For the year 2022, WeWork lost close to $2.3 billion, a notable improvement from 2021, when the company lost about $4.6 billion.
WeWork announces it has struck a deal with SoftBank and other investors to cut its debt by around $1.5 billion and extend the maturity dates on some of its remaining debt. Leaders also said the deal would allow the company to access $475 million in new financing.
Later in the month, WeWork executives announced that the company was making solid progress in its quest for profitability and had cut its net losses in half in 2022. Overall, CEO Sandeep Mathrani announced the co-working firm had grown its revenue 26 percent year-over-year to $3.25 billion. “This is WeWork’s moment,” Mathrani said in a letter to shareholders.
WeWork and joint venture partner Rhone Group default on its mortgage on an office building in San Francisco’s Financial District due to nonpayment. The $240 million loan was for a 20-story building at 600 California Street.
A week later, WeWork receives a non-compliance notice from the New York Stock Exchange, warning the co-working giant that it faces de-listing front he exchange after its stock closed below $1 on average over a 30-day trading period.
WeWork’s latest earnings report shows the company has narrowed its losses but moves the goal posts again on when it will become profitable to the second half of 2024. A week later, the company announces CEO Sandeep Mathrani, who was hired from Brookfield Properties in March 2023 to turn the company around financially, would be stepping down at the end of the month and taking a role at a private equity firm. A week after that, it’s revealed that WeWork’s CFO Andrew Fernandez is leaving the company as well.
Later that month, WeWork shutters a 75,000-square-foot co-working office in Irvine, California. WeWork’s office footprint in the Orange County region was 600,000 square feet at its height, but now stands at nearly half that figure, at 315,000 square feet.
In an effort to redefine itself after a tumultuous past few years, WeWork launches a rebranding campaign that takes a different, softer approach that represents a marked turnaround from the company’s roots as a place for startups that thrived on hustle culture.
A New York judge allowed a lawsuit from New York-based office landlord Sapir Organization against WeWork’s parent company to move forward. Sapir originally filed suit in August 2021 alleging the co-working firm abandoned its lease at the midtown office building 261 Madison Avenue and owed $17 million in damages. The complaint named WeWork co-founder Adam Neumann as the person who had guaranteed WeWork’s lease at the office building through 2028.
In WeWork’s second quarter earnings report released August 9th, the company stated it had “substantial doubt” about the ability to continue as a company, unless it improved its liquidity and profitability over the next 12 months. After being widely reported on after its release, WeWork Interim CEO & Director David Tolley downplayed the situation in the company’s earnings call the next day, saying it was a “technical accounting determination” that did not take into account steps the company is considering taking to get on better footing, including reining in expenses, getting more memberships, renegotiating for better lease terms, and gaining additional capital through taking on new debt or selling assets.
Tolley also pointed to the progress WeWork has made since the fourth quarter of 2019 in leaving or amending nearly 600 of its leases, which has cut an estimated $12.7 billion in leasing costs. “Despite this dramatic progress, cash rent and tenancy continues to be our primary challenge and obstacle to profitability and free cash flow,” Tolley said.
In early September, CEO David Tolley said in a letter posted to WeWork’s website that the company was renegotiating nearly all of its leases worldwide in an effort to cut down on its expenses. Tolley said lease liabilities accounted for more than 66 percent of the company’s total operating expenses in the second quarter of 2023. The CEO also said the company would shutter underperforming locations as part of the renegotiating effort, but emphasized that the moves didn’t mean company leaders were winding down the business. “WeWork is here to stay,” Tolley said in the letter.
On Oct. 2, WeWork said it would be skipping about $95 million in interest payments and that the move was one that would help kick off negotiations with its lenders. WeWork’s CEO said in an interview that the company had the cash on hand to make the payments and still had a 30-day grace period to make them. “I believe they will absolutely understand our decision to enter into the grace period,” Tolley said. Investors had a different take on the move, and the next morning, WeWork’s stock plummeted 24 percent in the first 30 minutes of trading.
WeWork officially announced that it was seeking bankruptcy protection. The proceedings will determine which debts will get restructured and which leases it will be allowed to break. WeWork will continue to operate with plans to reemerge as a more financially healthy company but many of its investors will likely be faced with large losses.
WeWork rose quickly to become one of the world’s most highly-valued startups. Its fall was just as fast. The public market has been harsh to the company, many of the problems came after the IPO. The extra scrutiny and pressure of making a company public can be enough to derail even the most well positioned startups. Tech companies in the future will surely use WeWork’s struggles as a cautionary tale. WeWork introduced the world to co-working (or at least made it seem cool). Flexible office arrangements will continue to reshape how offices are leased but, at least for right now, it looks like WeWork will have a smaller place in that ecosystem.