1-11-2023 (NEW YORK) WeWork, the flexible workspace provider backed by SoftBank Group, is reportedly preparing to file for bankruptcy as early as next week, according to a source familiar with the matter. The company is grappling with a significant debt burden and substantial losses, resulting in a sharp decline in its stock.
Upon the initial report by the Wall Street Journal, WeWork’s shares plummeted by 32% during extended trading. Throughout the year, the company’s stock has experienced a staggering decline of approximately 96%.
According to sources cited by the WSJ, WeWork is considering filing for Chapter 11 bankruptcy in New Jersey. WeWork declined to comment on the matter.
Earlier on Tuesday, WeWork announced that it had reached an agreement with creditors to temporarily defer payments for a portion of its debt. However, the grace period for these payments is coming to an end. As of the end of June, the company had accumulated net long-term debt of $2.9 billion, along with over $13 billion in long-term leases. The commercial real estate sector has been adversely affected by rising borrowing costs, further exacerbating WeWork’s financial challenges.
If WeWork proceeds with filing for bankruptcy, it will mark a remarkable reversal of fortune for the company, which had a private valuation of $47 billion in 2019. The bankruptcy would also serve as a significant setback for its investor, SoftBank, which has invested billions of dollars in the company.
WeWork has experienced a tumultuous period since its failed attempt to go public in 2019. Investors expressed skepticism about its business model, which involved leasing properties on a long-term basis and subletting them for shorter durations. Concerns over the company’s substantial losses further eroded confidence. Even after successfully going public in 2021 at a significantly reduced valuation, WeWork has continued to face financial challenges. In August, the company raised doubts about its ability to sustain operations, leading to the departure of several top executives, including CEO Sandeep Mathrani.
