Co-working pioneer WeWork will file for bankruptcy as early as next week, a source has told The Wall Street Journal.
Co-founded by Adam Neumann, Rebekah Paltrow and Miguel McKelvey, WeWork was launched in New York in 2010, originally catering to freelancers, start-ups and small businesses wanting to work in a millennial-styled collaborative space – think beanbag chairs and free beer on tap – before expanding its offering to larger businesses.
The source said WeWork is considering filing a Chapter 11 petition in New Jersey; a remarkable fall from grace for a business that was once privately valued at US$47 billion (AU$74 billion).
The business’ spectacular rise and fall was the subject of an AppleTV+ drama miniseries, WeCrashed, released in 2022.
It’s share price has fallen about 97 per cent this year and in August the company revealed it would only be able to stay in business if it improved its liquidity and profitability in the next 12 months.
But in a statement on October 2, WeWork CEO David Tolley said that the company had missed interest payments owed to its bondholders and entered a 30-day grace period to make the payments.
Yesterday the company said it had struck an agreement to allow it another seven-day grace period in which to negotiate with stakeholders before a default is triggered.
WeWork first hit trouble after abandoning plans to list on the stock exchange in 2019.
Would-be investors were sceptical of its business model of taking long-term leases on office space, which it then sub-let under short-term arrangements.
Mr Neumann also left the business in 2019 after concerns about his unorthodox management style and related-party transactions with the company surfaced.
WeWork eventually listed on the New York Stock Exchange in 2021 at a much-reduced valuation of US$9 billion (A$14 billion) and its major backer, Japanese conglomerate SoftBank, has sunk tens of billions of dollars into the business, but WeWork has continued to lose money.
Shares in WeWork fell 30 per cent after the reports of its impending bankruptcy first broke.
A WeWork spokesperson declined to comment to The Wall Street Journal about the speculation.
In the statement from October 2, its CEO said the business planned to “build a stronger and more profitable business” by renegotiating its leases globally.
WeWork has an estimated US$10 billion (A$16 billion) in lease obligations due starting from the second half of this year through to the end of 2027, according to public filings, at a time when rising borrowing costs are hurting the commercial real estate sector.
The statement from Mr Tolley said the decision not to pay the interest owed to its bondholders on time “enhances liquidity” but added: “We currently have sufficient liquidity to make the associated interest payments and may in the future decide to do so.”
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