The co-working giant WeWork, which received over $10 billion in investments from SoftBank and was later admitted by Masayoshi Son as a flawed investment, is now seeking to renegotiate almost all of its global leases. The company also plans to exit locations that are "unsuitable and underperforming."
In a statement released on Wednesday, WeWork's CEO, David Tolley, said:
"We will retain the majority of our office buildings. As we've done in the past when closing locations, we will promptly inform our members and provide alternative arrangements and additional support to minimize any disruption or inconvenience."
A month ago, WeWork expressed "serious doubts" about its ability to continue operations due to company losses and cash outflows, as stated in its Q2 financial report. This was followed by rumors of the company seeking restructuring to avoid bankruptcy.
The surge in remote work following the pandemic has diminished the demand for office spaces, causing the company to struggle. WeWork previously mentioned that its focus next year would be on reducing rental costs, negotiating more favorable leases, increasing revenue, and raising funds.
As of June this year, WeWork had 777 office locations in 39 countries, with long-term lease liabilities exceeding $13 billion. Most of these leases will expire in 2028 or later.
Analysts suggest that WeWork's ability to avoid bankruptcy largely depends on its success in terminating or renegotiating numerous leases in expensive markets.
For years, WeWork has been trying to reduce its long-term lease liabilities. After its failed IPO attempt in 2019, when Adam Neumann stepped down as CEO, the company's long-term lease liabilities had once exceeded $18 billion.
Meanwhile, landlords have been looking to reduce their exposure to the company. WeWork holds a significant share in office markets in cities like New York and London. In recent weeks, the company has also appointed a series of bankruptcy experts.
WeWork's stock price has plummeted by 98% over the past year.
Once one of the highest-valued startups globally, WeWork expanded rapidly since its inception in 2010. In January 2019, it received an investment from SoftBank, valuing the company at a staggering $47 billion, and later that year, it prepared for an IPO. However, after revealing its prospectus and financial details, WeWork faced criticism for overspending and risk-taking, leading to the IPO's collapse. At that time, Masayoshi Son confessed that investing in WeWork was "foolish."
The pandemic further exacerbated WeWork's challenges as many businesses terminated leases and shifted to online work models. Coupled with an economic downturn, WeWork's debt surged, and it struggled to generate cash flow. Even after going public via a SPAC in 2021, the company couldn't shake off its disadvantages. Currently, WeWork's market value is less than $200 million.
However, CEO Tolley emphasized that the lease renegotiations would have "no impact" on WeWork's daily operations. He stated in his announcement:
"To clarify one thing, WeWork is here to stay."
