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The Fall of WeWork: A Stunning Downfall

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Charles M. Hall

November 07, 2023

The Allure of Bankrupt Companies

Surprisingly, bankrupt companies still manage to attract some investors. Bed Bath & Beyond Inc., for example, saw a surge in its share price earlier this year, despite well-documented struggles. However, a few months later, the company announced that its shares would be canceled and hold no value as its bankruptcy plan took effect.

Current Status and Outlook

As of now, WeWork's stock remains halted since Monday's open and continues to be halted on Tuesday. In 2023 alone, the company's shares have plummeted by 98.5%, in stark contrast to the S&P 500 index's notable gain of 13.7%.

Howard Ehrenberg, a bankruptcy and reorganization practice partner at law firm Greenspoon Marder, aptly described WeWork's situation as "quite a mess." He added, "It's hard to envision how they can recover from this. Perhaps they'll re-emerge as a much smaller company."

The Fall of WeWork: A Decade of Financial Struggles

WeWork, the once-prominent flexible workspace company, has recently filed for bankruptcy. This development comes after several years of financial troubles and an ambitious expansion strategy that ultimately drained the company of its funds. In 2019, WeWork's CEO and co-founder, Adam Neumann, stepped aside, and the company sought a much-needed rescue package from Japanese tech conglomerate SoftBank.

According to Ted Gavin, managing partner and founder of turnaround firm Gavin/Solmonese, WeWork's downfall was inevitable. "The collapse of WeWork actually began a few years ago when it found itself running out of money due to its aggressive expansion approach, where no price was too high for acquiring office space," he stated. Despite the investor bailout and management change, the bankruptcy filing did not provide WeWork with the ability to reject the burdensome leases it had accumulated.

However, Gavin also acknowledged that there may still be a demand for WeWork, albeit in a more limited capacity than before. With the rise of remote work in a post-pandemic world, the need for shared office spaces may be lesser than it once was. Nevertheless, he believes that WeWork could adapt to this changing landscape and continue to serve a purpose.

WeWork's current CEO, Dave Tolley, expressed optimism about the company's future despite the bankruptcy filing. He stated, "Now is the time for us to confront our past by addressing our legacy leases and improving our financial stability. WeWork pioneered a new way of working, and these measures will allow us to maintain our position as the global leader in flexible work."

Related: Potential Consequences for WeWork Landlords in Bankruptcy

It remains to be seen how WeWork will navigate through this bankruptcy phase and whether it can successfully reinvent itself to meet the evolving needs of the workforce. Nonetheless, this serves as a cautionary tale about the importance of sustainable financial practices and strategic growth in the business world.