WeWork stares at possible bankruptcy after CEO and CFO exit
WeWork may have bankruptcy on its cards. Photo: AFP, Getty Images
In 2010, WeWork popularised shared office spaces with its charismatic and almost "cultish" leader/CEO Adam Neumann at the centre. Then the company's finances and leadership came under scrutiny as it tried to go public with an IPO in 2019.
What happened next has now been dramatised in the Apple TV Plus series WeCrashed. WeWork's co-founder and CEO Adam Neumann was shown the door. In 2020, Sandeep Mathrani, a real estate executive, was brought in to clean up the mess.
It seemed like WeWork was in good hands and it would stave off collapse. Mathrani helped WeWork float through the pandemic, even took the company public, cut the company's debt by restructuring, handled the finances and even got landlords to accept discounted rents.
But soon after restructuring was finished, Mathrani announced his resignation on May 16. Reuters reported the company saying that Mathrani's resignation was not due to any disagreement.
But now once again, the fast cash-burning company is in turmoil, with options including bankruptcy on the cards, according to the New York Times.
WeWork, more like WeMpty pic.twitter.com/SggwOswIES
— Daniel ∞ (@danielmerja) June 12, 2023
Why did Mathrani leave WeWork?
- NYT citing an unknown source said that Mathrani was "abandoning ship". It's not just Sandeep Mathrani who left.
- WeWork's CFO who had joined just a year earlier also left the company.
- Reportedly, Mathrani was frustrated with the "lack of engagement" he got from SoftBank, the Japanese conglomerate which is the largest stockholder in the company.
- NYT reported that Mathrani was "annoyed" that SoftBank did not move quickly enough to wrap up debt restructuring.
- Furthermore, Mathrani went to SoftBank with offers from other companies that were interested in dealing with WeWork including co-working company IWG. However, SoftBank wasn't interested.
- Even Adam Neumann showed interest in buying back some debt and shares in WeWork but wasn't entertained, according to NYT.
Most WeWork sites. Photos vs Real. pic.twitter.com/FDtNV9oH7J
— Piyush Verma (@realmeson10) June 11, 2023
Remote working has reshaped office work and it has had some impact on WeWork. Employers who no longer need their office space are leasing it out to others. And on average office sublets cost much less, in terms of Manhattan estimate, than a similar facility at WeWork.
On the other hand, there are too many competitors for WeWork now. From IWG co-working spaces to 91Springboard and Cowork, these co-working companies may not have as many offices and space as WeWork, but they are running more effectively, while WeWork's cost of running its business piles on.
the crowded co-working spaces are done for, and the cramped open plan offices provided by typical Silicon valley startup Entrepreneurs should be outlawed - offices for all now.
— Chad (@OTheChad) June 13, 2020
For those who do use co-working spaces, there are a number of issues to be faced with, including cramped spaces. Some may find WeWork (a largely costlier option) to be empty but in other more affordable co-working spaces, the story is that of shuffling chairs, where nobody's place is guaranteed.
Um, yes. Some co-working spaces are this cramped because of poor design, overcrowding, or both. https://t.co/AHBjJsjHBK
— Christina M. McDougall, MPA (@enbikelopedia) February 4, 2019
Even without the recent pandemic-induced challenges to office work, WeWork's entire business model was built on shaky a model. Now, once again it needs to be seen what fate has in store for WeWork. More than WeWork, its collapse could also come as a shock to the US commercial real estate market.