WeWork, once valued at $47 billion, is considering filing for bankruptcy as early as next week, according to media reports. The SoftBank Group-backed company, grappling with substantial debt and substantial losses, is contemplating a Chapter 11 petition in New Jersey, as per reports from the Wall Street Journal.
WeWork recently reached an agreement with its creditors to temporarily defer payments for a portion of its debt. However, the grace period for this arrangement is nearing its end. As of the end of June, the company reported a net long-term debt of $2.9 billion and over $13 billion in long-term leases, which coincides with a period of increasing borrowing costs impacting the commercial real estate sector.
This potential bankruptcy filing represents a significant shift in fortune for WeWork, which held a private valuation of $47 billion in 2019. It also raises concerns for investor SoftBank, which invested substantial sums in the company.
Since its failed attempt to go public in 2019, WeWork has faced ongoing challenges. Scepticism from investors about its business model, involving long-term leases rented for shorter durations, along with concerns about its considerable losses, led to the collapse of its initial public offering.
While it eventually went public in 2021 at a considerably reduced valuation, WeWork continues to incur losses. In August, the company expressed "substantial doubt" about its ability to sustain operations, and it witnessed a series of high-level executive departures throughout the year, including CEO Sandeep Mathrani.