WeWork, the office-sharing company, initiated Chapter 11 bankruptcy proceedings in a New Jersey federal court on Monday. The move came following agreements with most of its secured noteholders, with the company’s intent to shed “non-operational” leases.
It’s important to note that this bankruptcy filing exclusively pertains to WeWork’s locations in the United States and Canada, as stated in their official press release. The company disclosed its liabilities, ranging from $10 to $50 billion, in the bankruptcy filing.
WeWork CEO David Tolley expressed gratitude for the support from financial stakeholders and their collective efforts to reinforce the company’s capital structure through the Restructuring Support Agreement. Tolley emphasized their unwavering commitment to investing in their products, services, and a talented team of employees to continue supporting their community.
WeWork’s journey over the past few years has been marked by one of the most dramatic corporate collapses in recent U.S. history. Valued at $47 billion in a 2019 funding round led by Masayoshi Son’s SoftBank, the company’s attempt to go public five years ago was unsuccessful.
The COVID-19 pandemic exacerbated their challenges, with many companies terminating leases abruptly and the subsequent economic downturn leading even more clients to shutter their operations. WeWork had previously acknowledged the possibility of bankruptcy in an August regulatory filing.
WeWork made its debut via a special purpose acquisition company in 2021, but its value has plummeted by approximately 98% since then. To meet the New York Stock Exchange listing requirement, the company announced a 1-for-40 reverse stock split in mid-August to boost its shares above $1. Prior to the suspension of trading on Monday, WeWork shares had fallen to around 10 cents and were trading at approximately 83 cents.
The company’s former CEO and co-founder, Adam Neumann, expressed disappointment at the filing. He had observed from the sidelines since 2019 as WeWork failed to capitalize on a product that he believes is more relevant than ever today. Neumann is hopeful that a reorganization, when guided by the right strategy and team, will enable WeWork to make a successful comeback.
As recently as September, the company had stated that it was actively renegotiating leases and reaffirmed its commitment to persist in the market. According to securities filings, WeWork was bound by nearly $16 billion in long-term lease obligations.
The company has an extensive presence, leasing millions of square feet of office space across 777 locations globally, as detailed in its regulatory filings.
WeWork has enlisted the legal counsel of Kirkland & Ellis and Cole Schotz. PJT Partners will serve as its investment bank, with additional support from C Street Advisory Group and Alvarez & Marsal.