SoftBank's WeWork, once most valuable U.S. startup, succumbs to bankruptcy

WeWork, SoftBank-backed startup, seeks bankruptcy protection due to soured bets on office-sharing space. SoftBank's billions invested in turnaround failed to make company profitable. COVID-19 pandemic, competition from landlords, and economic downturn further weakened WeWork. CEO David Tolley, former Intelsat exec, tried to restructure debt, but bankruptcy inevitable.

WeWork, the SoftBank Group -backed startup whose meteoric rise and fall reshaped the office sector globally, sought U.S. bankruptcy protection on Monday, after its bets on companies using more of its office-sharing space soured.

The move represents an admission by SoftBank, the Japanese technology group that owns about 60% of WeWork and has invested billions of dollars in its turnaround, that the company cannot survive unless it renegotiates its pricey leases in bankruptcy.

Profitability has remained elusive as WeWork grapples with its expensive leases and corporate clients cancelling because some employees work from home. Paying for space consumed 74% of WeWork's revenue in the second quarter of 2023.

The company reported estimated assets and liabilities ranging from $10 billion to $50 billion, according to a bankruptcy filing.

"WeWork could use provisions of the U.S. bankruptcy code to rid itself of onerous leases," law firm Cadwalader, Wickersham & Taft LLP said in a note to landlords on its website in August. Some landlords are bracing for a significant impact.

Under its founder Adam Neumann, WeWork grew to be the most valuable U.S. startup, worth $47 billion. It attracted investments from bluechip investors, including SoftBank and venture capital firm Benchmark, as well as the backing of major Wall Street Banks, including JPMorgan Chase.

Neumann's pursuit of breakneck growth at the expense of profits, and revelations about his eccentric behavior, led to his ouster and the derailment of an initial public offering in 2019.