WeWork (WE) is poised to file for bankruptcy possibly next week, marking a downturn for the once $47 billion-valued flexible-office-space giant, as reported by the Wall Street Journal, which cited people familiar with the matter. As a result, shares plunged more than 34% after-hours. According to the report, the New York firm is planning a Chapter 11 petition in New Jersey.
On Oct 2, WeWork missed interest payments to its bondholders, initiating a 30-day grace period for payment. Without meeting this obligation, the company would face a default. However, on Tuesday, WeWork reached an agreement with its bondholders, granting them another seven days for discussions to prevent a potential default.
A restructuring is on the cards after WeWork reshuffled its board in August, bringing in directors skilled in financial restructuring. The company is now actively renegotiating leases.
As of June, WeWork operated 777 locations worldwide. Financially, it has lease obligations approximating $10B through 2027 and another $15B from 2028. After burning $530 million in the first half of 2023, it had about $205M cash by June.
Once celebrated in the venture capital realm, WeWork didn't meet the high hopes once held by investors. Adam Neumann, the company's co-founder, was ousted in 2019 due to concerns over his unconventional leadership and related-party transactions with the company.
In 2021, WeWork became public through a merger with a special-purpose acquisition company, following abandoned original plans for a public offering.