Aug. 9, 2023 "WeWork's 'substantial doubt' about its future marks a stunning fall": Today I found this article by Ellen Huet on the Financial Post:
For the past four years, WeWork Inc. has been trying to deliver a turnaround story — one in which the rowdy co-working startup transforms into a stable, profitable public company.
It sloughed off Adam Neumann, its rambunctious co-founder and former chief executive, and replaced him with an industry veteran boasting a reputation of saving troubled real estate companies.
WeWork was not saved, and the co-working company now says there’s “substantial doubt” it will even be able to stay in business.
The New York-based company is bleeding cash, and customers of its office rentals are cancelling their memberships in droves, WeWork said in a statement Aug. 8. Its shares fell 17 per cent in premarket trading on Aug. 9.
WeWork’s stock has plunged 98 per cent since the company went public in October 2021, wiping out nearly US$9 billion in market value.
The stock was trading at 16 cents early Wednesday. Its bonds are also at deeply distressed levels.
The company’s 7.875 per cent unsecured notes due in 2025 last changed hands for 33.5 cents U.S. on the dollar, according to data from Trace.
Few companies have risen to such towering heights only to crash so badly. WeWork was built on the idealism and charisma of Neumann, who started the business in 2010 with the designer Miguel McKelvey.
Their vision was to lease office space and then rent smaller parcels of it to customers.
The startup expanded slowly, then quickly, then at blinding speeds, fuelled by a zero-interest-rate financial environment in which venture capitalists dumped truckloads of money into startups that showed impressive growth rather than profits.
By 2019, WeWork was the biggest private occupier of office space in Manhattan and London,
operated millions of square feet in dozens of countries
and was valued at US$47 billion, which made it one of the most prized startups in America.
Flush with money and momentum, Neumann tried to take the company public in 2019, but the attempt at an initial public offering crashed when investors collectively woke up to the company’s extravagant spending and Neumann’s power-hungry eccentricities.
Disclosures in the prospectus set off alarms.
He was leasing space to the company in buildings he owned
and charged his own business US$5.9 million for a trademark on the name “We” that he owned.
Neumann was ousted in late 2019, and after thousands of layoffs and a bailout from WeWork’s biggest investor SoftBank Group Corp., the company named Sandeep Mathrani as CEO in the hope of a turnaround. Mathrani took over in February 2020, promising to staunch the financial bleeding and restore order.
Mathrani was dealt an unenviable hand. Almost immediately upon his arrival, offices worldwide shut down, as the COVID-19 virus sent people into sustained lockdown.
Overnight, the idea of setting foot in a WeWork became outlandish, even terrifying, and occupancy dropped to 46 per cent at its nadir.
The recovery was slow, and it took more than two years until WeWork’s offices were as full as they had been in late 2019. During that time, Mathrani tried other ways to keep the business going.
In 2021, he orchestrated a blank-cheque merger to take WeWork public, at the height of the frenzy for special purpose acquisition companies, or SPACs.
He oversaw the creation of a tech tool that landlords could buy to use WeWork software in their own buildings
and the development of more spontaneous, on-demand ways for customers to access WeWork offices.
WeWork seemed to achieve a milestone in March when it struck a deal with some of its biggest creditors and SoftBank to cut its debt load by around US$1.5 billion and extend other maturities.
But then in May, after three years on the job, Mathrani suddenly stepped down for a job at Sycamore Partners, leaving WeWork without a permanent replacement.
As the pandemic dragged on, WeWork insisted that the shift toward remote and hybrid work would actually favour the company rather than weaken its business.
Employers would be more wary of signing long-term leases
and would turn to WeWork’s flexible models instead, the company argued.
Though that could still pan out, it hasn’t been happening quickly enough for WeWork. In Tuesday’s statement, the company said
more customers were leaving
and fewer new members were signing up than it had anticipated.
That churn was cutting into its occupancy rate, which dropped in the second quarter compared to the previous one.
To avert disaster, WeWork said it will focus over the next 12 months on
reducing rental costs,
negotiating more favourable leases,
increasing revenue and raising capital.
On Tuesday, WeWork said three of its independent board members are being replaced by four new board members. It’s continuing to search for a permanent CEO.
—With assistance from Claire Boston.
https://financialpost.com/investing/wework-substantial-doubt-future-stunning-fall
My opinion: This part stood out to me the most:
"The startup expanded slowly, then quickly, then at blinding speeds, fuelled by a zero-interest-rate financial environment in which venture capitalists dumped truckloads of money into startups that showed impressive growth rather than profits."
You should be looking at profits than growth.
Also this part:
"As the pandemic dragged on, WeWork insisted that the shift toward remote and hybrid work would actually favour the company rather than weaken its business.
Employers would be more wary of signing long-term leases
and would turn to WeWork’s flexible models instead, the company argued."
Aug. 14, 2023 "'Hybrid is the new normal': Flexible work to survive despite gloomy signals": Today I found this article by Matthew Boyle on the Financial Post:
WeWork Inc.’s future is in doubt.
And Zoom Video Communications Inc., the pandemic poster child of remote work, just told its employees to get back to the office.
The headlines suggest flexible work is on the ropes — but it’s actually thriving.
The owner of co-working giant Regus — think WeWork, but with better cash flow and no leadership drama — just posted its best six-month sales period ever,
thanks to a growing list of customers that includes Zoom.
LiquidSpace Inc., a digital marketplace where clients like
T-Mobile International AG
and the United States federal government
find and book on-demand office space,
has seen transactions soar this year.
The share of companies offering location flexibility, meanwhile, increased to 61 per cent in July from 51 per cent in January,
according to Scoop Technologies Inc., which helps firms manage hybrid workforces.
So, despite the news from WeWork and Zoom — and the push by companies like Walt Disney Co. to get workers back in offices most of the week — there’s a growing body of
research,
trend data
and surveys
showing that flexibility matters.
Work is now a thing we do, not a place we go.
Offices play a role, but not the central one they’ve held for decades.
“The narrative hasn’t yet caught up with reality — and the reality is large corporations globally are moving to a much more flexible approach to how they support their people,” Mark Dixon, chief executive of Regus owner IWG PLC, said on a call with analysts Aug. 8.
“They are moving toward hybrid working. It’s universal, and it’s gathering pace.”
IWG provides a good example. There, revenue rose 14 per cent in the first six months of the year while operating profit more than doubled,
thanks to 400 new co-working spaces coming on board.
Some office landlords, saddled with stagnant occupancy rates and ballooning debt payments, are looking to co-working as a potential lifeline.
More than 10,000 building owners have reached out to IWG about starting a co-working arrangement, Dixon said Tuesday.
With 34 per cent of leased U.S. office space due to expire by 2025, according to brokerage JLL, Dixon expects that pipeline of potential customers to grow.
Dixon’s optimism contrasts with WeWork’s gloomy outlook. That company said Aug. 8 there’s “substantial doubt” about its ability to continue operating, citing sustained losses and cancelled memberships to its office spaces.
While WeWork is the best-known in the co-working space — thanks to its cinematic rise and fall — it’s just one player in a growing sector that now includes about 5,000 vendors offering 15,000 locations,
according to LiquidSpace founder and chief executive Mark Gilbreath.
He opened his first co-working space in Boise, Idaho, in 2008, two years before WeWork emerged.
The typical hybrid worker is using a flexible office 32 per cent more today compared with pre-pandemic levels, Gilbreath said.
Businesses have figured out there are both economic and cultural advantages to
detaching from long-term office leases
and giving employees some choice on where
and when they work,
he said.
While just a third of corporate real estate executives surveyed by CBRE said flexible office space made up a significant part of their portfolio today,
half of them expect that to be the case within two years.
Zoom’s shift simply puts it in line with its peers. “Our long-term health is closely tied to the extent we embrace a hybrid workstyle, which many of our customers embrace,” Zoom chief executive Eric Yuan said in an Aug. 3 memo obtained by Bloomberg.
Among employees who can work from home, the most common arrangement by far is hybrid, according to WFH Research, a group of economists who have been analyzing remote-work patterns since the pandemic began.
To be sure, the share of work done remotely in the U.S. has declined somewhat over the past year, according to WFH Research economist Jose Maria Barrero, but it’s not going away.
More than half of business leaders in multiple countries surveyed by McKinsey & Co. expect remote work to increase in the future, and when given the option to work remotely, most Americans take it.
Despite caricatures of fully remote workers lying on the couch in their pyjamas all day, the truth is that nearly half of them meet up with co-workers at least once a month, WFH Research has found.
Increasingly, those meetups are happening outside of traditional offices. A survey of 14,000 full-time office workers from architectural firm Gensler found that Americans spent 28 per cent of their workweek outside of their company’s office and their home, usually in a
co-working space,
client site
or a café.
Startups like Portland, Ore.-based Radious have emerged to make those gatherings easier.
Co-founder Amina Moreau wants her company to be the Airbnb of flex work, offering homeowners the chance to rent out their home offices to businesses.
Radious now has about 150 places available and will soon move into its third U.S. market. While the company focuses on small- to medium-sized firms, Moreau said she has picked up some former WeWork members.
“Our spaces are in the burbs, where people live, reducing commute times,” she said. “They also love that our spaces are private, whereas WeWork is a zoo of noise and distractions.”
— With additional reporting from Jo Constantz and Brody Ford
This article is so filled with contradictions. Starting with the title "Flexible work to survive despite gloomy signals - Headlines suggest flexible work is on the ropes — but it’s actually thriving". Then it states "To be sure, the share of work done remotely in the U.S. has declined somewhat over the past year, according to WFH Research economist Jose Maria Barrero, but it’s not going away" which doesn't suggest thriving. As well comparing work from home to pre-pandemic levels is laughable. The pandemic was a forcing function that drove masses of people to work from home. While the general theme is probably correct does Bloomberg not have a proof-reader with an ounce of critical thinking skills to test the quality of the article?
