We Not Working
WITH WORKPLACES around the world shuttered, one of the highest-profile casualties of the pandemic is likely to be a unicorn. Numerous WeWork locations were temporarily closed after employees or tenants tested positive for COVID-19. Others are virtually empty, as workers shelter in place. The coronavirus couldn’t have come at a worse time for the former highflier. One former executive told Forbes that WeWork needed the outbreak “like a fat kid needs more cake.” Even before the virus took hold, WeWork, with 739 workspaces and some 662,000 members worldwide, had already crashed to earth. Ugly reports of questionable behavior by cofounder Adam Neumann, a charismatic former Israeli naval officer, emerged. Not only had he received millions from WeWork for trademarking the word we (he later paid that money back) and leasing his own properties to the company, he reportedly encouraged a hard-partying work culture filled with tequila shots, lavish surf trips and a marijuana-fueled private jet ride. He was gone by late September. Soon after, the IPO was pulled amid disclosures of huge losses and crippling lease obligations. Valued at $47 billion in January 2019, WeWork was rescued in October by its lead investor, Japanese conglomerate SoftBank (see story, page 96), which agreed to pump $8 billion more into the business, bringing its total equity and debt commitment to more than $13 billion. The terms of the bailout valued WeWork at $8 billion, 80% below its peak. It also gave Neumann an exit package worth up to $1.7 billion (worth much less now). Alive but on shaky footing, WeWork laid off 2,400 in November and hired an outside CEO in February. In March, it sold its planned flagship headquarters, the former Lord & Taylor building on Manhattan’s Fifth Avenue, to Amazon for roughly $1 billion, likely taking a ninedigit loss. Then came the coronavirus. By mid-March, even its biggest backer had concerns. SoftBank advised WeWork’s other shareholders that it might renege on $3 billion owed to them, citing unmet conditions such as ongoing investigations by securities regulators. WeWork released a letter in late March showing 2019 revenue of $3.5 billion (up 90% from 2018) and about $2 billion in cash and $2 billion in financing commitments at year end. “We believe this provides us the financial resources and liquidity to execute our plan through 2024, including managing the near-term challenges and volatility presented by COVID-19,” WeWork said. Not mentioned: its staggering losses. Unlike much bigger rival IWG, which turns a profit every quarter, WeWork loses hundreds of millions of dollars each month. In the first nine months of 2019, total losses were $2.2 billion. WeWork is positioning its services as “essential,” but some tenants just want the offices to stay closed. “I know what the game is,” says Nataya Simmons, a tenant in Harlem who canceled her membership and refuses to pay April rent. “It is not about essential workers. It is definitely about them being able to pay their rent so they don’t go bankrupt.” Adds Chase Feiger, a Forbes Under 30 alumnus whose latest venture, RxDefine, previously rented space in two cities, “I think WeWork is potentially the worst place you can be during this pandemic.”