Why WeWork was Doomed from the First Day?

Photographer: David ‘Dee’ Delgado/Bloomberg/Getty Images

WeWork’s bankruptcy filing has arrived. The well-known flexible office-space company has filed for Chapter 11 bankruptcy protection in the United States and Canada, seeking to convert certain debts to equity investments, and “further rationalize its commercial office lease portfolio."

Who is Adam Nuemann?

Neumann was CEO of WeWork from its founding in 2010 and oversaw the office-sharing company's rise to an estimated valuation of $47 billion in 2019. He was then ousted from the company later that year. Adam Nuemann is a particular blend of salesmanship, cult of personality and his huge risks, cash burn didn't matter to anyone involved until it did.

Investors and SoftBank in particular, bought into his vision of WeWork as a tech startup, trying to revolutionize the office market. WeWork's strategy was to sign long-term leases on large properties, transform them into millennial approved spaces with Kombucha and beer on tap and then run out to businesses or individuals on shorter time frames.

Everyone wanted a piece, from Benchmark to JP Morgan, investors were clamoring over each other to get in. and the biggest of them all was SoftBank and its CEO Masayoshi Son, He gave WeWork a massive cash infusion.(almost $2Billion).

When finally WeWork opened up its finances to public scrutiny, gearing up for an IPO, it revealed widening losses and no path to profitability. I often see things like that happening all over the place and it baffles me why no-one can predict failures like this. WeWork obviously wasn't a tech startup, it was at best a real state company. The disasters kept piling up until Nuemann got pushed out by the board in 2019 and bearing the brunt of it, SoftBank. In March of 2020 the board brought in a real state veteran Sandeep Mathrani to save the company. A month later the pandemic torpedoed the plan with offices around the world left empty.

WeWork reportedly owed $98.6 million in unpaid rent and lease termination fees to different real state companies.

Adam and Rebekah Neumann are unfazed by the collapse into bankruptcy of the company he founded. While WeWork is in Chapter 11 he remains a billionaire and the couple have a palatial new home in Miami.

Despite efforts to turn the company around since Neumann’s departure — including significant cuts to operating costs and rising revenue — WeWork has struggled in a commercial real estate market that has been rocked by the rising cost of borrowing money, as well as a shifting dynamic for millions of office workers now checking into work remotely.

Adam Neumann speaks onstage during TechCrunch Disrupt in New York in 2017. , Photographer: Noam Galai/Getty Images

One may believe that some private equity company player is going to buy this out of bankruptcy and make a fortune. Someone who could ruthlessly restructure the company's costs and get rid of the locations that are not unprofitable and renegotiate leases for others by giving landlords a revenue share or just paying less rent. WeWork now has leverage because bankruptcy allows you to break leases. what do you think?