The rise and fall of WeWork
WeWork, you may have seen their signs on the streets of New York, London, Toronto, Shanghai and in other cities around the world. It’s a real estate startup known for providing shared office spaces worldwide. The company launched its first shared office space in New York in 2010.
By 2019, negative publicity saw the company’s valuation to drop from $47 billion in January to $10 billion by September.
Here’s what happened
The brains behind WeWork is co-founder and former CEO, Adam Neumann, who started the company with the idea of building a community where people could go in and work and feel like they belong to something greater.
Neuman received a lot of praise for his business idea and for launching WeWork locations around the world.
In 2014, WeWork expanded into the international market and eventually launched hundreds of locations around the world.
In January 2019, WeWork received more funds from Softbank and re-branded itself as The We Company, so they could expand into more industries like co-living spaces, entrepreneurship schools and other areas. While keeping with their branding of WeWork for their shared office side of the business.
In April 2019, The We Company decided to file for an initial public offering, or an IPO and this is where the trouble started.
WeWork’s financial state was out in the open and it was found that the company was not in good shape.
Investigations found Neuman had been buying properties and leasing them back to WeWork, borrowing against his own stake in the company. He also trademarked the word “We” and charged WeWork nearly $6 million for using the word after the company rebranded itself as The We Company.
Negative publicity saw the company’s valuation to drop from $47 billion in January 2019 to $10 billion by September 2019.
Global News spoke to Oana Branzei, an associate professor of general management, entrepreneurship, sustainability and strategy at Western University.
Branzei’s feels that WeWork’s valuation is “not a bad valuation, it’s just 10 times worse than the valuation they were expecting on the market.”
Will Mitchell, a professor of strategic management at the University of Toronto says the governance issues at WeWork “are things that a responsible board should have been on top of. But independent of those things, they haven’t proven that there is a market there for this business model… is trying to get to trying to get massively out ahead of the market.”
Softbank, the main investor of WeWork, tried to fix the company’s state. In late September of 2019, Softbank, along with board members of The We Company, convinced Adam Neumann to step down as CEO.
Neumann paid back the cash for the trademark name of “We”, but he is being offered a $1.7 billion buyout package.
Branzei says “they had to take a big bite in order to establish their brand and their reputation right then and there.”
In October 2019, The We Company withdrew its IPO application.
In November 2019, Softbank decided to restructure the company and lay off thousands of employees worldwide.
“New ventures fail, that’s the nature of the beast. People get in, they try something out, doesn’t work and they leave… people who are people going in to work should go into those jobs with their eyes open. They may or may not work” says Mitchell.
The company’s future is unclear, more layoffs are expected which come as the New York State Attorney General is investigating WeWork — focusing on various issues including a closer look into whether Neumann indulged in self-dealing to enrich himself.
© 2019 Global News, a division of Corus Entertainment Inc.