The WeWork curse has no end

In 2019, Israeli businessman Adam Neumann convinced the Japanese investment fund Softbank to invest $2 billion in the international expansion of his company, WeWork.. The coworking empire, which Adam had founded in New York just nine years earlier, was thus valued at $47 billion, an extraordinary figure for a company that had not made a profit in any of its years of activity.

It may sound absurd, but we must remember that, in 2019, WeWork was the fashionable company, the new example to follow for all entrepreneurs eager to create an empire.. It not only rented workspaces and meeting rooms. Neumann had turned the company into a philosophy of life, into an international brand that soon, he assured, would offer housing, education and all kinds of services to a millennial generation dissatisfied with the social norms of adult life.

Yesterday, the people in charge of the company recognized that there are serious doubts about the viability of the company. Of the 47,000 million that it came to be worth, hardly anything remains. Shares of the company immediately plummeted from what was already an all-time low.. They are trading at 13 cents on the dollar, less than a hundredth of what they were worth just a few years ago.. The market capitalization of the entire “empire”? Just over 270 million dollars.

WeWork's ordeal in the last four years has many stops and has been told in many ways. There are documentaries (WeWork: The Rise and Fall of a $47 Billion Unicorn), TV series (WeCrashed, produced by AppleTV) and books (The Cult of We) that explain Adam Neumann's uncanny ability to convince investors. -and especially Masayoshi Son, CEO of Softbank- that something as mundane as office rentals could be the business of the future.

Neumann was expelled from his company the same year that Softbank entered the shareholding. A disastrous attempt to go public put an end to the patience of Masayoshi Son and other investors. The numbers that made expansion possible for WeWork, which then had nearly 600,000 customers, just didn't add up.. In a limited capital company it was something that could be made up. In the audit process necessary to go public, no.

Softbank had to admit that the investment had been a mistake. “I regret having done it,” Son came to confess at the end of 2019. The situation was bad, but the investment fund still saw the light at the end of the tunnel. By controlling expenses and slowing down the expansion, the company could have benefits in 2021.

But then, in 2020, the COVID-19 epidemic arrived and the social isolation measures. WeWork offices around the world had to close for months. Companies and professionals who had contracted office spaces began to cancel their accounts. Working from home was no longer an alternative, it was the only option.

SoftBank put Sandeep Mathrani, an executive with extensive experience in commercial space rental, at the head of the company. Mathrani tried to find the positive angle. The new attitude of companies towards remote work could benefit WeWork, with more workers looking for a solution between going to the office and staying at home. If WeWork held on, it could emerge from the pandemic perhaps not strengthened but at least stabilized.

In 2021, the company finally managed to go public by relying on one of the so-called “blank check companies”, a tactic that manages to avoid part of the complex inspection process that brought down the first attempt to go public.. Mathrani's vision, however, did not fully materialize and WeWork's bleeding of clients has not stopped in the last three years.. Neither did the fall in its share price. In the presentation of the latest financial results, the company has recognized that the casualties are much higher than expected.

In March, the company agreed with SoftBank on an outstanding debt restructuring that has given it some breathing room, but the deal meant the sacrifice of Sandeep Mathrani as CEO.. Since then, David Tolley, former director of the company, has held the post on a provisional basis.

The priority, now, is to find someone capable of refloating a company that seems doomed to bankruptcy. WeWork has managed to increase its revenue in the last year, but closed 2022 with almost 2.5 billion dollars in losses. It is half of what he lost in 2021, but unsustainable no matter how you look at it. In the latest regulatory report, executives are especially pessimistic. “There are substantial doubts about the company's ability to continue operating,” they say.. If things don't change in the next 12 months, the company that promised to revolutionize society in the 21st century will cease to exist without having generated a penny in profits.