WeWork is on the verge of filing for Chapter 11 bankruptcy in New Jersey, according to sources cited by The Wall Street Journal.
If WeWork does indeed file, it shouldn’t come as a shock to close followers of the flexible workspace provider. WeWork warned in August in its second-quarter earnings that “substantial doubt exists about the company’s ability to continue as a going concern.”
The company has faced a number of challenges for years as demand for its co-working spaces has steadily declined over time. Those troubles compounded during the COVID pandemic when companies abandoned office space and employees began working remotely. Even as some companies have returned to the office, the appetite for WeWork space didn’t rebound to those pre-pandemic days.
Earlier this month, WeWork missed interest payments to its bondholders, and was granted 30 days to come up with those payments, according to a securities filing. On October 30, WeWork said it had begun discussions with “certain stakeholders in its capital structure” such as SoftBank and Goldman Sachs about improving its balance sheet as it took steps “to rationalize its real estate footprint.”
In August, the 13-year-old company announced a net loss of $397 million for the second quarter on revenue of $877 million. While revenue was up 4% year-over-year, WeWork interim CEO David Tolley noted in a statement at the time: “Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships.”
The company’s stock was down over 47% after-hours today, trading at just $1.21 and hitting a new 52-week low. This gave the company a market cap of just $121 million, a stark contrast to the $47 billion valuation it reached after raising $1 billion in its SoftBank-led Series H round in January 2019.