This Time, WeWork Failed Like a Regular Ol’ Company
When WeWork filed for bankruptcy on Monday, one reasonable response was to double-take and remind yourself that WeWork still exists. The co-working–space company’s public implosion in the late 2010s, which was exciting enough to spawn an Apple TV+ miniseries and all kinds of exciting pop-cultural fare, didn’t reduce the company entirely to rubble. Its tribulations under its self-dealing, vaguely cosmic co-founder Adam Neumann were captivating but not fatal. In contrast, WeWork’s latest demise was fatal but not captivating.
In a way, WeWork is exceptional. Usually when a business fails in such a way that Jared Leto and Anne Hathaway play its principals, the failure was total and swift. But WeWork’s most famous stretch of bad news was different. Back in its days as a private company, WeWork’s value reached $47 billion, thanks to a series of exceptionally ludicrous funding rounds from investment conglomerate SoftBank. When bankers were constructing the company’s initial public offering, they thought about pricing WeWork at a figure closer to $100 billion. It turned out that Neumann was a world-class huckster and the company couldn’t justify such a big valuation, and WeWork aborted the IPO. Neumann, who once laid off employees with tequila shots and a performance by a member of Run-DMC, had to leave but got an all-time golden parachute. WeWork kept soldiering on, no longer a sexy brand but still a company. It went public in October 2021 at around a fifth of its old valuation. But that was still about $10 billion.
It wouldn’t be right to attempt to decouple Neumann’s shenanigans from WeWork’s ultimate fate. If he hadn’t burned through so much money with unrealistic expansion plans and extravagant parties, maybe WeWork would have had more money in the bank years down the line to accomplish more useful ends. Maybe it would have had fewer liabilities. Or a better, trustier reputation, as opposed to one that investors and potential customers immediately associate with stories about an oddball founder who lost a bunch of money. All sorts of things might have been different in a world in which WeWork’s most important person was some completely normal MBA who did normal startup-founder things. But WeWork still existed after Neumann was gone, and then things got both worse and more boring. WeWork’s steep descent from one of the hottest startups in the world to a regular ol’ public company trying to make a go of it made for better television than its slippage into cold, hard bankruptcy.
WeWork’s problem—aside from whatever damage Neumann did to its reputation and finances—was exactly what you think it was. Neumann once said that WeWork wanted to “create a world where people make a life and not just a living,” and it turns out that a lot of people agreed with that vision. That’s part of why a lot of people just work at home now. The market for corporate office space is bad. WeWork turned out to be a corporate real estate company, not a life-creation company, and that was bad.
More specifically: WeWork spent huge sums of cash on office leases. At the end of this June, the company said it had $13 billion in long-term lease obligations. The company lost $397 million in that quarter, actually much better than in the same period the previous year. People did not want to work in WeWorks nearly as much as WeWork wanted to operate WeWorks. The company had more liabilities than assets and began to warn the public of what was coming. “Substantial doubt exists about the Company’s ability to continue as a going concern,” the company’s CEO, David Tolley, said in announcing those results. WeWork’s plan was to get more customers, watch its expenditures, try to raise money, and try to renegotiate leases for more favorable terms. Those did, indeed, seem like the only plays left in the playbook.
The death rattle from there was gradual. In August, WeWork unveiled a reverse stock split, combining its outstanding shares into units 40 times bigger than before. The company did that so it could keep its stock price above $1 and thus keep the shares listed on the New York Stock Exchange. The stock did not go up. In September, the company said it was “kicking off a process of global engagement with our landlords to renegotiate nearly all our leases.” In October, it skipped $95 million in interest payments. And now, in November, it has pushed the bankruptcy button. It has apparently done so with an eye toward staying alive in some form. Tolley says that while it’s in bankruptcy, WeWork will shore up its finances and that “these steps will enable us to remain the global leader in flexible work.” Maybe you’ll work in one again.
The old WeWork is finally dead, though, and it took a long time. Think about the small delta of time that so often occurs in splashy stories of business disaster. Sam Bankman-Fried’s crypto exchange went to dust literally overnight; one day, customers could withdraw their money, and the next, they couldn’t. A day earlier, before a death spiral of some crypto tokens, all looked fine. Bernie Madoff’s Ponzi scheme ran out of money, and a day after he told his family, he was in handcuffs. Elizabeth Holmes’ blood-testing company was able to stay above water through many months of skeptical reporting, but it all eroded quickly once enough people were clear that the founder was a charlatan.
WeWork was different, perhaps because Neumann’s fraudulence wasn’t the criminal kind, just the kind that wholesomely convinced some very rich people to let him light their money on fire. The best proof of this wholesomeness is that Masayoshi Son, who lost billions on WeWork, said after the fact that he still loved and respected the founder who had bilked him. So profound is Neumann’s charisma, at least to the right audience, that he has another real estate company with venture capital backing and moneyed people are apparently urging him to get involved in WeWork’s bankruptcy and maybe resuscitate it. Or maybe WeWork lasted this long because Neumann’s management of the company came under the weight of pre-IPO due diligence back in 2019, before the company had a chance to go into a more rapid tailspin. Maybe Bankman-Fried, who will have a lot of time to think about what went wrong in his own business, could’ve gracefully exited the crypto space with a lavish package if only some bankers had looked under FTX’s hood before everything got out of control.
But comparing WeWork to a new-age business isn’t entirely appropriate. For one thing, it plays into Neumann’s vision for the company as something other than a corporate real estate concern. For another, WeWork didn’t run out of money like a new company. It went bust like an old one, trying a bunch of classic tactics of last resort as it slowly faded away. It wasn’t FTX as much as it was Bed Bath & Beyond.
