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WeWork is a company that rents shared office spaces and services to freelancers, startups and businesses. Founded in 2010, it grew rapidly into one of the most highly valued startups, reaching a peak valuation of $47 billion in 2019. However, following a failed IPO attempt and the impacts of the COVID-19 pandemic, WeWork has seen its valuation plummet to just $280 million as of August 2022. This blog post will explore the history of WeWork – how it grew so quickly, what led to its downfall, and what the future looks like for the company.
The Early Years and Rapid Growth
Founding and First Funding Rounds
WeWork was founded in 2010 by Adam Neumann, Miguel McKelvey and Rebekah Neumann. The concept was to rent out coworking office spaces with short-term leases and plenty of amenities. This was targeted at freelancers, startups and small businesses who wanted flexibility.
The company opened its first locations in New York City and attracted its first investors in 2011, with funding from Joel Schreiber, Edgar Bronfman Jr. and Mortimer Zuckerman. Over the next few years, WeWork expanded across the US and internationally, including major cities like London and Shanghai.
SoftBank Investments and Peak Valuation
In 2017, WeWork raised $4.4 billion from Japanese investment firm SoftBank, valuing the company at $20 billion. This included $3 billion directly into WeWork and $1.4 billion into WeWork’s China, Japan and Pacific subsidiaries.
In January 2019, SoftBank led another $2 billion funding round, bringing its total investment in WeWork to $10.5 billion. This pushed WeWork’s valuation up to $47 billion dollars. At its peak, WeWork was operating over 500 office spaces globally in more than 100 cities.
The Failed IPO and Neumann’s Ouster
In August 2019, WeWork filed its paperwork for an initial public offering (IPO). The prospectus provided the first in-depth look at WeWork’s financials and business practices. This revealed major losses – WeWork had lost $1.6 billion on just $1.8 billion in revenue in 2018.
There were also concerns around corporate governance, as CEO Adam Neumann had control of the company through special voting shares. After the backlash, WeWork postponed its IPO indefinitely. Neumann was forced to step down as CEO in September 2019.
Financial Troubles and SoftBank Bailout
With the failed IPO, WeWork was quickly running out of cash to sustain its rapid growth and expansions. In October 2019, WeWork was facing bankruptcy without an infusion of new funding.
SoftBank stepped in again to bail out WeWork, providing $5 billion in new financing. This gave SoftBank an 80% stake and control of the company.
Even with the bailout, WeWork still had to lay off thousands of employees and close or sell off unprofitable locations around the world.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic that began in early 2020 was a huge setback for WeWork. With lockdowns and remote work, demand for its office rentals dried up. WeWork’s occupancy rates fell below 50% in 2020.
More layoffs and cost-cutting ensued as WeWork tried to survive the pandemic’s impacts. In 2020, WeWork racked up $3.2 billion in losses on just $2.2 billion in revenue.
SPAC Deal and Return to Public Markets
In March 2021, it was announced that WeWork would go public through a merger with BowX Acquisition Corp, a special purpose acquisition company (SPAC).
The deal gave WeWork an enterprise valuation of just $9 billion – significantly lower than its peak of $47 billion. But it provided a lifeline, giving WeWork $1.3 billion in cash.
WeWork began trading on the NYSE again in October 2021 under the ticker WE. However, the stock consistently traded below its $10 SPAC deal valuation.
Continued Struggles and Bankruptcy Fears
Even after going public, WeWork continued to post losses, burning through cash reserves. Occupancy rates improved post-pandemic but remained below pre-Covid levels.
In August 2022, WeWork warned in an SEC filing that “substantial doubt exists about the company’s ability to continue as a going concern”. Its stock tanked to all-time lows below $1 per share.
In October 2022, reports emerged that WeWork could file for bankruptcy as soon as November 2022. This sent the stock plunging once again. WeWork’s market cap now sits below $300 million – a remarkable fall from its $47 billion valuation just a few years ago.
What Does the Future Hold?
WeWork still faces significant challenges if it wants to avoid bankruptcy and rebuild. It needs to renegotiate leases, reduce expenses, increase sales and improve occupancy rates across its global portfolio.
However, demand for flexible workspace remains, especially with the growth of hybrid remote/office work models. If WeWork can right-size and stabilize its business, there is still potential for a turnaround.
But after its epic rise and fall, it remains unclear if WeWork can regain its stature as a leading flexible workspace provider. Its story serves as a cautionary tale about reckless growth and poor corporate governance.
The story of WeWork’s dramatic growth and subsequent implosion is extraordinary even by Silicon Valley standards. At one point valued higher than established companies like General Motors, WeWork’s worth has evaporated in spectacular fashion.
Its future remains uncertain – while bankruptcy is on the table, WeWork still retains strong brand recognition in the coworking space segment. But there are big questions about whether its underlying business model is sustainable in the post-pandemic landscape.
The rise and fall of WeWork is a fascinating business case study that offers lessons about startups, corporate governance, real estate and much more. While its outlook is gloomy, this once high-flying unicorn still has a chance to turn things around and find firmer footing. Only time will tell if WeWork can recover and rebuild from its mistakes, or if its best days are firmly in the past.