At the WeWork branch on Amsterdam’s Weteringschans, people walk in without any problems on Tuesday morning with access passes on their way to their workplace. Alexander Buurman of software company Pivit Global, who is smoking a cigarette in front of the door, had not yet read the news about the office landlord’s moratorium application last Monday. “I knew they were in trouble, but not that it had gotten to that point yet. I hope I can still get in,” he says. “Wait, now that you mention it: I did receive an email this morning,” says Buurman as he takes his phone out of his pocket.
In an email from WeWork, with the subject ‘An important update’, WeWork CEO David Tolley tries to reassure his customers. WeWork will continue to exist despite the “strategic reorganization” and “our members are our top priority,” says Tolley. The mission to be “the world’s largest flexible office rental company” remains unchanged.
The fact is that WeWork announced on Monday that it was requesting a payment deferral in the United States and Canada. Through a so-called Chapter 11 procedure, it is given a last chance to settle its debts with creditors. In an explanation, the company said that its main creditors would be willing to make agreements that would resolve approximately $3 billion in debt. It could also terminate lease contracts prematurely under the Chapter 11 arrangement. All this is desperately needed to prevent an immediate ‘Chapter 7’ – what we know here as bankruptcy.
Beginning of the end
Although bankruptcy protection has come into effect, no one seems to believe that WeWork will bounce back. The office landlord’s stock price has all but disappeared since the beginning of this year. The latest closing price is 84 dollar cents, compared to 56 dollars at the beginning of this year.
WeWork’s receivership marks the beginning of the end for what was one of the most valuable start-ups in the world last decade. Between 2010 and 2019, founder Adam Neumann’s American company grew into a company with 13,500 employees and more than 800 branches in 123 cities, including Amsterdam.
Branches outside the US are not covered by the moratorium. The four properties that WeWork rents out in Amsterdam do not belong to the company itself, it rents them from international real estate investors. Office investor NSI is one of them; NSI said in a response that it is monitoring the situation “closely” and is in good contact with WeWork. The branch in question will remain open for the time being.
At its peak in 2019, WeWork was worth $47 billion (42 billion euros at the time). Softbank, the largest tech investor in the world, invested $10 billion in the company of the then forty-year-old Neumann. A striking investment, since WeWork was not actually a tech company, but an office landlord that presented itself as a tech company.
Softbank CEO Masayoshi Son fell for Neumann’s charms, with his long hair, love of surfing, and sneakers almost a stereotype of a start-up founder. Son made his fortune through a golden move: in 1999 he invested $20 million in the Chinese online store Alibaba, now one of the largest tech companies in the world. He did this after a fifteen-minute appointment with Alibaba’s founder Jack Ma, during which Son thought he noticed a “twinkle” in Ma’s eyes. Son also applied this intuitive approach to Neumann, whom he saw as “a son.”
Not long after the company’s valuation peaked, it became clear that in reality, WeWork wasn’t doing so well at all. When the company had to open its books to aspiring investors in 2019 in preparation for an IPO, it became clear that it was losing around $200,000 per hour and was being managed in an authoritarian manner by Neumann. WeWork was unable to recover from the outbreak of the corona crisis, in which working from home became the norm overnight. The demand for flexible workplaces and coworking spaces fell sharply.
Still going to the fair
WeWork had to close branches worldwide and lay off employees. It would take two years before WeWork would make its IPO through a special acquisition – of the original 47 billion dollars there was still 9 billion left.
Before the news about WeWork’s suspension of payments was announced on Monday, former CEO Neumann released a statement. “It has been challenging for me to watch from the sidelines since 2019 as WeWork has failed to capitalize on a product that is more relevant today than ever before,” he wrote.
Neumann, who left WeWork with a severance package worth $445 million, has now started a new company: a mysterious real estate company called Flow, which wants to convert homes into workplaces. The faith is there, again. In July, top Silicon Valley investor Marc Andreessen announced that he would invest $350 million in Neumann’s new adventure.