WeWork has filed to begin bankruptcy proceedings to protect itself as it reorganizes debt in US and Canada only.
Co-working space provider WeWork Inc (NYSE: WE) has filed for Chapter 11 bankruptcy in New Jersey federal court. The bankruptcy filing is expected to protect the company from action against landlords and creditors as the company tries to manage its heavy debt.
WeWork is now worth less than $50 million, from a $47 billion valuation back in 2019.
In a bankruptcy filing, WeWork said its liabilities range from $10 billion to $50 billion. Notably, the company’s filing limits its bankruptcy proceedings to locations in the US and Canada. WeWork currently has over 700 locations around the world, with around 730,000 members.
In a press release, As of September, WeWork had nearly $16 billion in long-term lease obligations. The company announced in a September letter that it is trying to renegotiate “nearly all our leases”.
Following the bankruptcy filing, new CEO David Tolley said:
“I am deeply grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and expedite this process through the Restructuring Support Agreement. We remain committed to investing in our products, services, and world-class team of employees to support our community.”
WeWork has been in the news at different points over the years and for various reasons. In 2021, the company went public through a special purpose acquisition company (SPAC). Shares closed more than 13% higher than its debut on that day. In August 2019, an IPO filing revealed that the company lost $1.9 billion the year before, and could quickly burn the rest of its cash. Since then, WeWork has lost about 98% of its value.
Trading Halted on the NYSE
To retain its listing on the New York Stock Exchange, WeWork announced a 1-for-40 reverse stock split. The company’s stock had fallen under $1 since late March and was at risk of losing its position on the NYSE. Companies trading less than $1 per share can trigger an NYSE delisting. WeWork shares were finally halted on Monday at about 83 cents per share.
There were also reports about how founder and former CEO Adam Neumann lived a lavish lifestyle with wife and WeWork cofounder Rebekah Neumann. For instance, reports in 2019 claimed the Neumanns bought a $10.5 million Manhattan townhouse set with an estimated renovation project pegged at $6.5 million. There was also a $35 million property in Gramercy Park, residences in Westchester County and the Hamptons, and a $21 million house in San Francisco. Furthermore, reports noted at least $100 million in startups and commercial property and a Gulfstream G650 private jet.
Interestingly, WeWork’s Q4 and fiscal year 2022 results seemed optimistic at its release back in February. The company reported $848 million for the period ended December 31st, an 18% increase from the previous year. For Q4, the company said membership rose 17% year-over-year (YoY) on a consolidated basis, while All Access and ON-Demand consolidated memberships grew 56% YoY. Although its Adjusted EBITDA was negative $26 million, it was a 75% improvement quarter over quarter.