WeWork has filed for bankruptcy. Here's a look at its downfall
JUANA SUMMERS, HOST:
The office-sharing company WeWork has filed for bankruptcy. It was once the hottest startup in Silicon Valley, but it ran out of cash, and then the pandemic had a lot of people working from home. NPR tech correspondent Bobby Allyn joins us now. Hey, there.
BOBBY ALLYN, BYLINE: Hey.
SUMMERS: So Bobby, help us understand here - how did WeWork go from the super popular, buzzy startup to being, well, it sounds like flat broke?
ALLYN: Yeah, well, WeWork's former CEO, Adam Neumann, was this long-haired, eccentric entrepreneur who exuded confidence and charmed investors around the world. He was pitching WeWork just as startups like Airbnb and Uber were rising, and he saw WeWork fitting into the same sharing economy boom. And it became this $47 billion company on a simple idea, right? Make office spaces feel chic and trendy and rent them out by the month or by the day, and then try to foster some kind of community around free beer and pingpong tables, right?
ALLYN: I actually used to work from a WeWork in San Francisco with panoramic views of the Bay Area and cold-brew coffee on tap. Look, it was nice, but the company simply opened too many places to get free coffee around the world. WeWork was taking out these 15-year leases but had no idea how it would fill up the space even just a year or two out. Eventually, Adam Neumann - his grandiose plans fell apart. The company laid off thousands. It attempted to reinvent, and it just wasn't able to.
SUMMERS: OK, but why was that? Why couldn't WeWork turn itself around?
ALLYN: Yeah. Well, in 2021, the company brought in new leadership, with traditional real estate executives running the company. But by then, it had just entered too many office contracts around the world, and many were empty. As debt was piling up, it was running out of cash. SoftBank, the Japanese telecom conglomerate, was WeWork's biggest investor and bailed WeWork out. But WeWork became, you know, so huge during this era of easy money, when venture capitalists financed all kinds of unproven, young companies. And as that started to change and interest rates started to rise, it became more expensive to borrow, and WeWork just kept burning cash. And then the pandemic really hurt the company. It was a terrible time to have taken out hundreds of office leases. Still, I talked to NYU finance professor Aswath Damodaran, and he told me WeWork's collapse was mostly a self-inflicted wound.
ASWATH DAMODARAN: WeWork claimed to have reinvented the business without ever reinventing it. That was the vanity that led it to become as big as it was. And to me, WeWork will be Exhibit 1 in what happens when arrogance kind of rises to the top and lets you believe that the rules don't apply to you.
SUMMERS: That is a pretty damning assessment there. Bobby, here's the question I have about all of this, right? The way that we work and the places that we work has changed so much. So I wonder if you can tell us - for you, what does WeWork's bankruptcy tell us about the overall state of the office-sharing business right now?
ALLYN: Yeah, well, WeWork's bankruptcy filing, you know, says it's planning to offload about 70 leases, but it has more than 700 locations around the world. And most of them are going to be staying open during this bankruptcy reorganization, so we're looking at a smaller WeWork company. But to answer your question, since the pandemic, overall demand for office-sharing - or what's known as co-working spaces - has really grown. Some companies are reducing the sizes of their offices and having employees report from these co-working spaces. You know, workers are closer to home. They can have more flexibility. But look, it is not for everyone. I think WeWork's bankruptcy has shown that there are a finite number of people who will use co-working spaces. But real estate experts say when co-working businesses actually are run well, look, it can be a viable business. And maybe this new WeWork that will emerge will be more viable. We shall see.
SUMMERS: We will. NPR's Bobby Allyn. Thank you.
ALLYN: Hey, thanks so much.
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