WeWork, the shared office provider once valued at $47bn (£37bn), has warned it is at risk of bankruptcy as employees continue to work from home.
Shares in the flexible workspace provider plunged after it said in a statement late on Tuesday that “substantial doubt exists about the company’s ability to continue”.
David Tolley, interim chief executive of WeWork, blamed the firm’s woes on the oversupply of offices as people continue to work remotely.
He said: “Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships.”
Bankruptcy would be the denouement of a spectacular fall from grace for WeWork, which was at one point among the most valuable private companies in the world.
The company, which rents desk space in managed offices, was co-founded by Adam Neumann in 2010 and grew rapidly in an era of low interest rates and start-up businesses.
However, WeWork was forced to abandon a much-anticipated listing on the New York Stock Exchange in 2019 amid reports of excessive spending and alleged drug use by Mr Neumann. The Wall Street Journal reported at the time that he smoked marijuana on a private jet and frequently handed out tequila while conducting business.
Investors were also sceptical of the company’s stock market prospectus, which was dedicated to “the energy of we” and said the business’s “mission is to elevate the world’s consciousness”.
Mr Neumann was ousted after the float was abandoned and WeWork was forced into a rescue deal with its biggest backer, Japan’s SoftBank, that saw its value tumble more than 75pc.
Mr Neumann received an exit package of $245m in company stock and $200m in cash.
WeWork was listed two years later in a deal that valued it at $9bn, roughly a fifth of its estimated value in 2019.
WeWork was hit hard during Covid-19 as social distancing rules triggered a boom in homeworking.
The company is yet to make a profit, even as people have started returning to the office post-pandemic.
WeWork said the company’s future is dependent on its ability to “improve liquidity and profitability over the next 12 months”.
The plan involves raising additional capital through the issuance of stocks or bonds, or asset sales.
In March, WeWork said it had struck deals with Softbank and other investors to reduce its debt by around $1.5bn.
Shares in the company have fallen by more than 95pc in the last year but have dropped by a further 30pc since Tuesday’s announcement.
The company is now worth just $450m.
It has 512,000 members across 610 locations with a current occupancy rate of 72pc.
Since leaving WeWork, Mr Neumann has started a new property business called Flow, which is aimed at renters who work from home.
Shares in rival workspace provider IWG, which owns Regus, rallied nearly 10pc in the wake of WeWork’s news.