In August, the company shook up its board after three directors resigned due to a material disagreement regarding board governance and the company’s strategic direction, according to a securities filing. WeWork appointed four new directors with expertise in large, complex financial restructurings. Those directors have been negotiating with WeWork’s creditors over the past several months about a restructuring plan as they prepare for the bankruptcy.
The flexible-workspace provider has been aiming to renegotiate leases with landlords after signaling that it has substantial doubt about its prospects for survival. Chief Executive David Tolley said during a September conference call with landlords that WeWork’s lease commitments must be “right-sized” to accommodate its operations in the current market because the office real-estate market has fundamentally changed.
In the narrative surrounding WeWork's dramatic decline, the COVID-19 pandemic often takes center stage. This is, to be frank, a fucking cop-out. The intrinsic issues that plagued WeWork predate the pandemic.
WeWork's business model was fundamentally flawed. The long-term lease obligations paired with short-term membership revenues created a financial structure that was untenable. This mismatched revenue model made the company extremely vulnerable to market fluctuations, a weakness that would have surfaced with or without a pandemic.
The company's rapid expansion and overvaluation were symptomatic of a deeper malaise. With a valuation peaking at $47 billion in January 2019, the company was not generating profits commensurate with its valuation. The overly ambitious expansion strategy not only strained resources - it showcased an utter lack of prudent management and foresight.
Governance issues and managerial missteps exacerbated WeWork's problems, embodied by the controversial figure of co-founder Adam Neumann. This lack of corporate oversight precipitated a loss of investor confidence, which was only heightened by the scrutiny brought about by the failed IPO attempt in 2019.
Yes, the pandemic undoubtedly exacerbated WeWork’s woes. But it merely unmasked pre-existing vulnerabilities. The confluence of a flawed business model, rapid over-expansion, poor governance, and stiff competition set the stage for WeWork’s decline.
This is not a tragic story of failure in a changing world reshaped by a global disaster. It’s a story of wasted investment funds, ego and bullshit.
