And 2023 has proved another tumultuous year for WeWork. CEO Sandeep Mathrani left the company in May, having joined in 2020. It issued a going concern warning in August, a move that raised doubts about its future survival. WeWork then failed to make required interest payments in early October.
In a September letter, Tolley wrote that the company was working to “renegotiate nearly all our leases” and would close underperforming locations. Tolley said the company’s leases made up two-thirds of its total operating expenses in the second quarter of 2023 and are “too high and are dramatically out of step with current market conditions.” But, at the time, Tolley was bullish: “Let me finish by making one thing clear: WeWork is here to stay.”
WeWork’s model hinged on the idea that it could charge a premium for subleasing spaces and desks in a leased office space, adding perks like fancy furniture, meeting rooms, and happy hours to sweeten the deal. But it wasn’t a model that scaled well; some WeWork locations burned through cash, and it was vulnerable to market changes. The company signed long-term leases and gave its customers the flexibility of renting for just a day or a month at a time—but when customers ditched their desks, WeWork was still on the hook for its often gargantuan leases.
That created a situation where its long-term obligations remained stable and the amount the company could make from rent fell. “The business model itself was not sustainable,” says Manish Srivastava, a professor at New York University’s Schack Institute of Real Estate.
As of June, the company had $13 billion in long-term lease obligations, according to its second-quarter earnings report. Its revenue was up year over year and its losses down, but WeWork’s second quarter revenue of $844 million was nearly eclipsed by the $725 million it spent on location operating costs. At the time, WeWork had 777 locations in 39 countries, and 72 percent of its space was occupied. It said in November 2022 it would close 40 underperforming locations in the US.
Neumann, WeWork’s founder and first CEO, tried to take the company public in 2019 but failed so tremendously that the story inspired a documentary and a hit TV series. Under new leadership, WeWork went public in 2021. Its share price has dropped 99 percent since, now sitting at $0.84 as trading paused on Monday morning.