Is WeWork Done? CEO Quits
Posted on 06/12/2023
WeWork Inc. was touted as the ultimate shared office space experience company. The company lured SoftBank Vision Fund to back it and with that sovereign wealth fund capital – Saudi Arabia’s Public Investment Fund and Mubadala Investment Company. In WeWork’s IPO filing, it read “We dedicate this to the energy of We — greater than any one of us but inside each of us.” At the time, the company changed its name to The We Company. Earlier, former WeWork executive Richard Markel had sued WeWork over the company’s “cultish” culture. Before WeWork’s implosion, in less than a decade, Adam Neumann and his wife grew WeWork from a single shared office in Manhattan to a worldwide brand with co-working spaces in 111 cities.
Earlier WeWork desperately restructured its large amount of debt, taking on higher interest rates. SoftBank has invested nearly US$ 12 billion in WeWork and is its largest shareholder. SoftBank has also lent WeWork hundreds of millions of dollars, and took a haircut on its WeWork debt in a recent debt restructuring.
WeWork’s CEO Sandeep Mathrani abruptly left in May 2023 after growing frustrated with SoftBank, its largest shareholder and lender. Sandeep Mathrani tried to cut costs to turn a profit after WeWork raised billions from investors. The real issue is that WeWork did not have a profitable business model (think REGUS on steroids). Sandeep Mathrani peaced out and left for a role to lead real estate investment at private equity firm Sycamore Partners. Mathrani arrived at WeWork in 2020 to replace ousted co-founder Adam Neumann. The tall, long-haired Israeli serial entrepreneur Neumann swooned sovereign wealth and other investors on WeWork in a bid for the firm to “elevate the world’s consciousness.”
Even more scary, WeWork Chief Financial Officer Andre Fernandez quit after only one year on the job.
WeWork is still burning through large amounts of cash each quarter. The bar tab is now due. Now a potential bankruptcy of WeWork could impact the already weak U.S. commercial office market. As of June 12, 2023, WeWork had a market capitalization of US$ 385.11 million.