American co-working giant WeWork is planning to file for bankruptcy in the US, the Wall Street Journal reports, after missing interest payments to bondholders and the closure of three Australian locations in the past month.
Citing unnamed sources with knowledge of the business, the outlet reports WeWork is considering filing for Chapter 11 bankruptcy in the US state of New Jersey, marking a dramatic about-face for a business once valued at US$47 billion (AU$74.1 billion).
WeWork missed an interest payment deadline to its bondholders early in October, the WSJ reports, but recently gained an extra week to negotiate with those relevant parties before a default is declared.
Rocked by high operating costs, long-term leases, and the work-from-home revolution, WeWork in August flagged “substantial doubt” it would be able to stay in business.
At the time, the company’s interim CEO David Tolley said memberships had declined due to competition increasing supply of commercial real estate, growing competition in the co-working sector, and general macroeconomic volatility affecting its clientele.
WeWork has closed three of its Australian locations since then: 66 King Street in the Sydney CBD; 50 Miller Street in North Sydney, where it was five years into a 12-year lease; and 260 Queen Street in Brisbane.
A desire to “achieve a sustainable capital structure and profitable business to serve our members for the long term” drove the shuttering of those two Sydney locations, a WeWork spokesperson told The Australian Financial Review in October.
Its 15 remaining locations, spread across Sydney, Brisbane, Melbourne, and Perth remain open.
The recent turmoil comes at the tail-end of a difficult stretch for the company.
With billions of dollars of backing from Japanese investment giant SoftBank, the business was privately valued at US$47 billion before its attempted 2019 IPO.
However, investor concerns over corporate losses, and the management of founder and then-CEO Adam Neumann, saw the company go public at a dramatically lower valuation in 2021.
In that time, a litany of competitors have sprung up to provide co-working options at home and abroad.
At the same time, Australian CBD office occupancy rates are yet to return to pre-pandemic levels.
SmartCompany has contacted WeWork for comment.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
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