The bankruptcy of WeWork, the company founded by the eccentric Adam Neumann that promised to change the concept of the office

It was a revolutionary idea that promised to change the concept of the office by creating shared workspaces, a model known as coworking.

At the helm of WeWork, a company considered the startup with the highest market value in the United States, was co-founder Adam Neumann, a young Israeli businessman known for giving free rein to his eccentricities, such as walking. barefoot through the offices, a swimming pool and a sauna in the office and organizing ‘legendary’ parties.

Since founding WeWork in 2010, Neumann convinced a series of top investors, such as Japan’s Masayoshi Son, owner of Japanese group SoftBank, to invest in his company, expanding the company to 120 cities in dozens of countries.

WeWork raised large sums of money to finance its business venture, increasingly increasing the value of a company that presented itself as a technology start-up but was in reality a real estate company.

For example, the company reached an estimated market value of $47 billion in 2019.

It seemed impossible at the time that the charismatic leader would eventually resign and that the company would be unable to pay off its debts a few years later.

This Monday, WeWork filed for bankruptcy in the United States.

Devoured by debt

Filing bankruptcy gives you the option obtain legal protection from his creditors as he attempts to restructure his massive debt.

At its current share price, WeWork was worth less than $50 million on Monday, a small amount compared to its heyday.

The bankruptcy will impact operations in the United States and Canada, but the company said operations will continue in other parts of the world.

In an email to its London customers, the company said it remains “fully committed” to providing its services, although doubts remain.

“The challenge for WeWork is that there are now a multitude of alternatives, so the initial differentiation they relied on is no longer a strong point,” Paul Frampton-Calero, global president of consultancy Control v, told the BBC.

How did you go from success to failure?

WeWork’s corporate culture, which combined work and fun, raised initial doubts among those who were already skeptical of the company’s sudden rise.

The glamorous personal life of Adam Neumann (his wife Rebekah is the cousin of actress Gwyneth Paltrow, while his sister Adi is a former model who was once Miss Teen Israel), his excessive spending and eccentricities, and a numbers-oriented leadership style in business, didn’t help either. to trust.

Doubts fueled rumors about Neumann’s true management skills, but it wasn’t until the company made plans to go public that distrust about the company’s financial health began to multiply.

Things got complicated when potential Wall Street investors They questioned the connection between Neumann’s personal finances and WeWorkas well as his decision to expand the business into areas of his personal interest such as surfing.

This became clear in 2019, when the company was about to go public its losses were as spectacular as its valuation.

As soon as WeWork released detailed financial information, the market discovered that the company was in trouble and that Neumann’s promises were not supported by the data.

Neither the ‘innovative’ business model, nor the accounts, nor the promising plans supported the market value it had achieved.

Amid the turmoil, Neumann was forced to resign as CEO.

Softbank decided to save the company, but despite all efforts, it failed to correct the company’s course.

In 2020, the pandemic delivered a brutal blowwhen confinement and the expansion of teleworking completely changed the use of offices.

Once the pandemic ended, many moved away from office work or adopted hybrid work programs that ultimately hurt WeWork’s business even further as the company tried to stay afloat.

The last part of autumn

The company acknowledged in August this year that it had doubts about its viability and when it failed to pay interest on several debt issues on October 2, it initiated emergency talks to try to clear its accounts by selling assets and renegotiating about contracts. .

It finally filed for bankruptcy this Monday, closing the chapter in a four-year story questioned the business model of technology startups (or the companies that presented themselves as such) that convinced prestigious investors, achieved gigantic valuations (despite losses) and ultimately ended up in harsh reality.

The company said in a statement that it is taking all necessary steps to reduce its debt, including planning a debt-for-equity swap.

And it said it will reduce its office rental portfolio. “WeWork requests the opportunity to terminate the leases of certain properties, the majority of which are not operational and all involved have been notified in advance,” the statement said.

“Global operations are expected to continue as usual,” he added.

Ultimately, WeWork’s rise was as rapid as its resounding fall The charisma of Adam Neumann, who convinced many of his colossal efforts, made it clear that it takes much more than words to build an empire.

(JO)