WeWork files for bankruptcy

New York (CNN) — WeWork, the beleaguered coworking space company, has filed for bankruptcy, marking a stunning downfall for what was once the world’s most valuable startup.

The Chapter 11 bankruptcy announcement was widely expected after the company said last month it was struggling to pay back its debt. The pandemic rocked WeWork as people started working from home instead of commuting into office spaces. The company’s stock lost more than 99% of its value, and the SoftBank-backed venture, which was privately valued at around $47 billion at its peak, was worth $45 million Monday before its bankruptcy filing.

WeWork said it would remain open and operational as it renegotiates its leases and debt obligations. The company said late Monday that investors holding 92% of the company’s secured debt have agreed to adjust the terms of their loans to help the company remain in business.

“Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet,” said David Tolley, WeWork CEO, in a news release. “We remain committed to investing in our products, services, and world-class team of employees to support our community.”

Monday’s announcement does not impact WeWork outposts outside of the US and Canada.

Once a much-celebrated tech unicorn that promised to revolutionize the future of office work — via, among other things, free-flowing craft beer — a perfect storm of factors caused WeWork to start to come undone in the wake of a botched attempt to go public back in 2019.

At the time, IPO paperwork revealed larger-than-expected losses and potential conflicts of interest with the company’s cofounder and then-CEO Adam Neumann. Neumann, whose unorthodox leadership style resulted in WeWork’s culture becoming the subject of much news coverage, was ousted in 2019 following pressure from investors. (Notably, Neumann still received an eye-popping golden parachute upon his departure).

WeWork eventually went public roughly two years later at a much-reduced valuation of some $9 billion. But by 2021, market sentiment, and the easy access to capital that helped prop up much of the startup world before the pandemic, had started to shift. Although WeWork billed itself as a tech company, some critics noted its core business was not in tech but was really in real estate, renting space in office buildings to retrofit and sublet to startups, freelancers as well as large and small companies.

Even after going public, the company has struggled to turn the ship around. The flexible workspace provider was confronting a difficult time in the commercial real estate sector after the pandemic led to a rise in hybrid and work-from-home options – threatening the very office culture WeWork’s foundation was built upon. Meanwhile, increased competition in the coworking space, higher interest rates and macroeconomic uncertainty also cast a cloud over WeWork’s attempts to save itself over the past few years.

Shares for WeWork have plunged roughly 98% in 2023 alone. In May, WeWork announced a leadership shakeup with the departure of its chairman and CEO Sandeep Mathrani, a real estate executive who investors hoped would save the company. David Tolley, a WeWork board member, stepped up as interim chief executive and was officially named CEO in October. In August, meanwhile, the company said that it had “substantial doubt” about its ability to stay in business over the next year as losses and debt continued to mount.

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