Coworking space provider, WeWork Inc is all set to file for bankruptcy as early as next week, according to sources familiar with the matter on Tuesday.
WeWork Plans To File Bankruptcy
It appears that the SoftBank Group-backed company is struggling with a massive debt pile and hefty losses.
As we know that WeWork Inc. is a provider of coworking spaces, including physical and virtual shared spaces, which is headquartered in New York City.
In this latest development, the shares of the flexible workspace provider fell 32% in extended trading after the news of bankruptcy came into picture due to reports by media.
All in all, the shares of this company have fallen roughly 96% this year.
The sources familiar with this development said that this New York-based firm is now considering filing a Chapter 11 petition in New Jersey.
As of date, WeWork did not release any statement in this regard.
A Black Spot For The Investors
Prior to this, WeWork said that it had entered into an agreement with creditors for temporary postponement of payments for some of its debt, with the grace period nearing an end on Tuesday.
Precisely, the coworking space provider firm had net long-term debt of $2.9 billion as of June end.
In addition to that more than $13 billion debt is in long-term leases that too at a time when rising borrowing costs are hurting the commercial real estate sector.
If WeWork goes ahead with the filing for bankruptcy, it would mark a stunning reversal of fortune for the company that was privately valued at $47 billion in 2019.
Besides this it would also mark a black spot for investor SoftBank that sunk billions.
It appears that the company has been in turmoil ever since its plans to go public in 2019.
The company was imploded following investors’ skepticism over its business model of taking long-term leases and renting them for the short term and worries over its hefty losses.
In the subsequent year, WeWork’s woes did not abate, but It finally managed to go public in 2021 at a much-reduced valuation.
The company’s investors including Japanese conglomerate SoftBank, sunk tens of billions to prop up the startup, but the company has continued to lose money.
It further raised “substantial doubt” about its ability to continue operations in August, as numerous top executives, including CEO Sandeep Mathrani, departed the company this year.
