WeWork, the troubled office business which Japan's SoftBank has recently taken over, will get rid of 4,000 employees in an effort to make it sustainable.
The Financial Times estimates that the organization would slash its employees by 30 percent, and around 1,000 of those cuts will be positions such as cleaning staff. WeWork is said to want these types of jobs outsourced.
The organization would concentrate its resources on three main markets: Asia, Europe, and the United States. WeWork will also abandon regions such as Africa, Latin America, and China.
The new strategy is to raise occupancy rates to 90 percent in its most populated areas, which in some locations where the organization is seeking to rapidly broaden its presence would be an improvement from under 80 percent.
WeWork's new executive director, Marcelo Claure, told employees that the only way the company could be successful was to "right-size" the operation, despite job losses.
"Sure, there will be lay-offs- I don't know how many - and sure, in order to achieve positive free cash flow and productivity, we have to scale the company," he wrote to workers in a memo.
"But I'll continue to handle those who abandon us with honesty, integrity, and justice. And for those who remain, we must guarantee that everyone is involved and will participate in future value formation."
Co-founder Adam Neumann, new WeWork chief executive officer, was reportedly offered $1.7 billion in shares, money, and credit to leave the company. Neumann is also going to give up his voting shares and offer to SoftBank over $1 billion in stock.
Sources say SoftBank will also obtain a credit line of about $500 million and a consultant payment of $185 million.
The deal is also estimated to price WeWork at about $8 billion, far less than the firm is supposed to get in its now-abandoned proposals for an initial public offering (IPO), and far less than the January $47 billion valuations it got.
WeWork, in peril of being totally cash-strapped, has chosen Softbank's restructuring proposal over JPMorgan Chase & Company's rival program, according to sources with knowledge of the matter.
A badly-needed last-ditch effort, the arrangement is expected to shore up the company's future following reports that it was collapsing as early as the start of the year.
According to corporate filings, Wework earned $1.9 million in 2018 and burnt out $2.36 billion in the first half of 2019. The company has been downgraded in recent weeks by international rating agencies Standard & Poor's and Fitch, bringing its scores further into distressed territory.
