On November 6, 2023, it announced its surrender to the fait accompli, requesting a federal court in New Jersey to protect it from bankruptcy under Chapter No. 11.
The request for bankruptcy protection culminates a long path of confusion and faltering that the American WeWork empire has gone through over the years,
as the company specializing in renting shared work spaces began to suffer with the collapse of its plans to go public in 2019, which led to a reduction in its valuation from $47 billion. During the days of bliss, it reached about 8 billion dollars within a period not exceeding ten months.
Who is WeWork?
It is an American company that provides shared office space for rent. It was founded in 2010 and is headquartered in New York City.
After winning the Grammy Awards for the tenth time,. Who is 80-year-old Joni Mitchell?
WeWork provides its services to entrepreneurs and large companies and has more than 5,000 employees in 32 countries around the world.
The company’s value in 2017 amounted to about 20 billion US dollars, with the expansion of its business in America, Europe, and Israel and its entry into the Chinese market through the establishment of an independent entity carrying the name WeWorkChina.
In 2018, WeWork managed more than 4 million square meters and became popular for providing nap areas in its office spaces.
The beginning of the collapse and its causes
The WeWork crisis erupted in September 2019, when the company was planning to offer its shares on the stock exchange at a value exceeding 47 billion US dollars.
As the offering date approached, shareholders doubted the size of WeWork’s valuation, considering it to be much more than it should be. The company sensed this matter.
It began leaking information about its intention to reduce the value to less than $20 billion, which increased investors’ doubts about its status, after which WeWork was forced to freeze the offering process.
Boeing intends to repair 50 737 MAX aircraft due to a technical defect.
The financial statements that WeWork submitted to complete regulatory matters related to the
IPO on the New York Stock Exchange played a major role in increasing doubts about it, as the data showed that the company is still struggling to achieve profits, with its losses amounting to about two billion dollars in 2018, and in addition to that, there was concern.
Among the ranks of investors was the behavior and dishonesty of the company's founder, Adam Neumann, with their discovery that he had made hundreds of millions of dollars through selling and borrowing operations in exchange for his company's shares.
Japanese savior
After the failure of the IPO process, WeWork became in dire need of liquidity, as only 30 percent of its rental spaces were generating income, and it needed an additional billion dollars to prepare the other spaces for rent, and thus it found itself unable to obtain the financing. necessary to finance its investment plans.
At the end of October 2019, WeWork accepted the offer made by the Japanese “Soft Bank” to acquire 80 percent of its shares in exchange for
a rescue package worth $9.5 billion. Under this deal, “SoftBank” offered to buy shares worth up to $3 billion from shareholders and inject $5 billion in loans from financial institutions, in addition to accelerated financing worth $1.5 billion.
The deal also included the exit of WeWork founder Adam Neumann from the company in exchange for his retaining shares worth $1.2 billion.
SoftBank is trying to retreat.
In 2020, SoftBank announced that it would not move forward with the rescue deal, which prompted WeWork founder Adam Neumann to file a lawsuit demanding that the Japanese
institution adhere to what was agreed upon so that it would be announced in 2021 that the legal dispute between the two parties had been settled. In exchange for
SoftBank spending about half the value of what was agreed upon on the stock purchase, WeWork will then be offered for public offering on the New York Stock Exchange in 2021 at a greatly reduced valuation of about $9 billion.
The curse of losses haunts WeWork.
The years following 2021 did not witness a decline in WeWork's problems, as the company did not achieve any profit at all from the steps it took, but it was able to reduce its losses in 2022 to about $2.3 billion, that is, nearly half of the losses recorded in 2021.
In August 2023, WeWork warned of its imminent bankruptcy, which caused the value of the company's shares to fall to 12 cents, causing the stock to lose more than 98 percent of its registered value after the company went public on the New York Stock Exchange in 2021.
The only way to survive
WeWork knew it could only survive by seeking Chapter 11 bankruptcy protection and using the provisions of that law to extricate itself from some onerous leases.
In a filing in New Jersey Bankruptcy Court, WeWork listed assets of $15.06 billion and liabilities of $18.66 billion as of June 30, 2023.
It said in a statement that, as part of its filing for bankruptcy protection, it could demand denial of leases for certain sites that were largely unproductive.
Netanyahu: Hamas made “demands that we will not accept.”
WeWork expected that it would have the financial liquidity to continue operating normally, noting that its locations outside the United States and Canada were not affected by the procedures for requesting bankruptcy protection.
Expenses exceed revenues.
Economist and banker Dr. Nassib Ghobril said, in an interview with the “Eqtisad Sky News Arabia”
website, that “WeWork” is a company that rents offices with long-term contracts, up to 15 years, in order to rent them to other companies, as it has incurred receivables worth 47 billion US dollars.
As a result of the long-term lease contracts it committed to, while its confirmed revenues were only about $4 billion, he stressed that WeWork suffers from several problems,
the most important of which is the lack of clarity of its business model, problems in governance, and the presence of a clear conflict in the interests of those responsible for it, in addition to the inflating of the company’s value. .
Gabriel pointed out that the spark for the collapse of WeWork was represented by what former founder Adam
Neumann and his wife made of personal exploitation of the company’s revenues to finance their personal lives and the purchase of several apartments and a luxurious mansion in
New York, in addition to the purchase of a private plane that was placed in the company’s name, for their personal uses, revealing that
Neumann also registered all words related to the We trademark as rights to another company owned only by him, and WeWork had to pay Neumann millions of dollars for its use of these words.
Gabriel believes that the WeWork crisis is old, began before Corona, and has nothing to do with the bad economic situation, which prompted many media organizations to highlight the company’s violations.
Many investigations have also been published, confirming that WeWork’s bankruptcy is inevitable.
Pointing out that the company, after requesting bankruptcy protection, must regain the confidence of consumers by clarifying its business model,
providing an objective and realistic assessment of its situation, and adapting to its new situation by not expanding, reducing its expenses, and proving that it is capable of achieving profits in the medium and long term.
Fatal errors
For his part, financial analyst Mohamed Al-Hassan said, in an interview with the “Eqtisad Sky News Arabia” website, that there are various kinds of mistakes in the business world, and what happened with “WeWork”
is due to the company committing fatal mistakes at the administrative and financial levels, which began with the strange behavior that...
It was adopted by its founder, Adam Neumann, which led to the IPO in 2019 being derailed, so that the company continued the path of decline, due to the bad
global economic situation caused by the spread of the Covid-19 virus and later the repercussions of the Russian-Ukrainian war, its impact on inflation and the US Central Bank’s resort to raising interest rates.
WeWork fought to survive in a market that witnessed rapid changes, but the combination of mismanagement and bad luck led to the company eventually declaring bankruptcy, which was not surprising.
Caterpillar Inc. earnings and revenue beat expectations in Q4.
According to Al-Hassan, at times companies can do everything they need to do to save their business, but they may fail
nonetheless. WeWork was already suffering from problems repaying its debts, and so it took many steps that contributed to a significant decline in operating costs.
It led to an increase in revenues, and it also engaged in a process to restructure its debts and was able to amend 590 lease contracts,
which saved about $12.7 billion in fixed rental payments, but this was not enough to compensate for the repercussions of the COVID-19 pandemic, which changed the concept of work. In addition to the high cost of lending due to high interest levels,.
0 Comments