WeWork is considering filing for Chapter 11 bankruptcy in New Jersey as early as next week, according to media reports.。The SoftBank Group-backed company is currently facing huge debts and huge losses.。

                

The "unicorn" of the joint office

                   

WeWork shares fell nearly 47 percent to close at 1 percent on Nov. 1 after news of the planned bankruptcy filing was released..21美元。Its shares have fallen more than 96% this year and the company is now valued at less than $65 million.。At WeWork's "Highlight Moment," its valuation was close to $47 billion, a far cry from today.。

WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey with the goal of providing shared workspaces for freelancers, startups and companies looking for "flexible office solutions."。

The company's business model relies on leasing space from developers over the long term, renovating and dividing properties, and then leasing them to short-term customers.。This model has flourished in previous years during periods of low interest rates, and the company was once the largest private office tenant in New York City。

In 2014, WeWork was valued at more than $1 billion and began to be noticed by the capital markets and was dubbed the "unicorn."。In 2017, SoftBank made its first investment in the company totaling $18.5 billion.。Two years later, as SoftBank continued to invest, WeWork's valuation peaked at $47 billion, and the market began to anticipate the company's upcoming IPO.。

But WeWork's IPO has been a rough road.。First IPO of 2019 The company announced it was stranded after facing intense scrutiny。Issues faced during the review process include overspending, unexpected losses, founder Neumann's resignation and conflicts of interest involved, among others.。In September 2019, WeWork withdrew its IPO application.。

In October 2019, SoftBank Group acquired an additional $5 billion in funds to acquire 80% of the company's shares.。A month later, WeWork laid off about 2,400 employees, nearly a fifth of its workforce.。

Real estate veteran Sandeep Mathrani was named CEO in 2020 to turn the company around by eliminating recurring costs and restructuring debt.。In the same year, the emergence of the epidemic forced a significant shift to remote work, resulting in a decline in demand for office space。WeWork's business model focused on shared physical space faces huge challenges。

In 2021, WeWork went public through a special purpose acquisition company (SPAC) merger, but after the IPO was shelved for two years, the company's value has shrunk by nearly $30 billion.。

               

The business model is in doubt.

                  

WeWork racked its brains to finally go public。After the IPO, the company made a strategic shift to focus on key markets, cost optimization, and to meet large corporate customers with mixed job needs.。But after doing so much work, the company's business didn't get any better。

The main reason is that investors have been skeptical of its long-term and short-term rental business model and have expressed concern about its huge losses.。As a result, the company's share price has been languishing for a long time.。

The emergence of the 2020 epidemic has exacerbated the company's plight.。The surge in the number of people working from home, coupled with the rapid rise in global interest rates last year, has seen a sharp contraction in cash flow in the commercial real estate sector, amplifying the risks to the company's business model。

Although the "big gold owner" behind it, SoftBank, has invested tens of billions of dollars in it, the company is still struggling to reverse its declining performance and has been losing money.。

WeWork disclosed in its SEC filing that the company had a net loss of $11.4 billion from 2020 to June 30, 2023.。Speaking on this year's second-quarter earnings call, WeWork executives warned of "serious doubts" about the company's ability to stay afloat and said the company's losses would continue.。Meanwhile, WeWork also made a 1: 40 reverse stock split to retain its listing status on the New York Stock Exchange.。

In addition, a number of executives, including CEO Sandeep Mathrani, left this year, leaving the company with a severe brain drain.。

In August, current interim CEO David Tolley said: "Oversupply of commercial real estate, increased competition for shared space and macroeconomic volatility have led to higher-than-expected member churn rates.。"

WeWork has more than 18 million square feet of rentable office space in the U.S. and Canada alone.。Industry insiders believe that WeWork's bankruptcy filing may have a "considerable impact" on the commercial real estate industry.。

WeWork's bankruptcy filing also marks SoftBank's investment failure。In the face of WeWork's perennial losses, SoftBank Group founder Masayoshi Son once lamented, "Investing in WeWork is my stupid move.。"

              

Heavily indebted, uncertain outlook

              

As of the end of June this year, the company's long-term net debt was $2.9 billion and long-term leases exceeded $13 billion.。

On October 2, WeWork said it was unable to pay creditors the current interest payable on notes due in 2027, involving an amount of about $95 million.。The company has a 30-day grace period before it is judged to be in "default."。

On October 31, the company said again that, despite the company's cash payment, it had elected to hold off on paying interest on a senior note payable on November 1 (which matures in 2025) with a grace period of 30 days.。WeWork, however, added that it had reached an agreement with creditors to temporarily defer payment of some other notes.。

WeWork is reportedly looking to finalise a restructuring deal in the coming weeks and could execute it as part of its bankruptcy filing as early as November.。Terms of deal have not been finalized and plans are subject to change。

People familiar with the matter said that major supporters of WeWork, such as SoftBank Group, and bondholders such as King Street Capital Management ("King Street") sought to take control of the company through a new restructuring after injecting capital into the company.。BlackRock and Brigade Capital Management were also involved in the talks, another person familiar with the talks said.。

In the restructuring package, the discussion focuses on how much debt the company can support and which creditors need to swap the debt for equity。SoftBank and bondholder groups have been negotiating how to deal with the letter of credit financing SoftBank provided to the company in 2020, which has since been amended several times, according to people familiar with the matter.。People familiar with the matter said WeWork may need to use the financing to support its short-term financing needs.。

In March, WeWork struck a deal with bondholders such as SoftBank and King Street to use the company to help cut about $1.5 billion in debt.。In the agreement, the bondholders agreed to swap the unsecured bonds for new long-term notes and inject new capital into WeWork.。SoftBank, for its part, exchanged some of its debt holdings and converted more than $1 billion in bonds into equity.。

WeWork has not disclosed the information.。Whether the company can survive, and where its "way out" is still unknown.。