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WeWork to file for bankruptcy

WeWork is planning to file for bankruptcy as early as next week, according to numerous reports.

The company is saddled with net long-term debt of $2.9 billion and $13bn of long-term leases, while rising interest rates mean servicing debt is becoming tougher.

WeWork operates by leasing offices and letting them on a short-term basis, but a number of loss-making deals – combined with the effects of the covid-19 pandemic – resulted in a dramatic fall from grace.

The company’s founder Adam Neumann also departed ignominiously in 2019 after using the company stock as collateral to secure personal loans.

Susannah Streeter, head of money and markets, Hargreaves Lansdown, said: “A sorry end is in sight for the high gloss, hyped up house of cards, otherwise known as WeWork. The office space company, which once boasted a valuation of $47 billion, is expected to file for bankruptcy this week.

“The company was heralded as ‘the future of the office’, but essentially its business model hinged on taking on long leases and renting them out short term. It gained the support of the Japanese conglomerate Soft Bank, which has already had to swallow a staggering loss, having poured in billions of dollars to prop up the company after its initial investment.

“Although the façade had started to be chipped away to reveal big losses and high debts before the pandemic, the Covid-crisis put paid to its already weak business model. As freelancers and small business owners got used to working from home, and saving on office costs, its potential customers started evaporating.

“It did manage to list in 2021 and had offices in around 600 locations globally. But in August this year, the company cited substantial doubts about the company’s ability to operate as a going concern and now this impending implosion looms. The story of WeWork is a cautionary tale to not believe the hype and to look deep under the bonnet of a company and the wider sector, before investing.‘’

WeWork, based in New York, saw its value plumet after attempting to sell shares on the stock market 2019, which highlighted its debts, losses and management issues.

The firm, which was valued at roughly $47bn (£38.7bn) at its height in early 2019, has lost almost 98% of its stock market valuation in the last year.

It was eventually listed on the New York Stock Exchange in 2021 with a far lower valuation.

Japanese conglomerate SoftBank has pumped tens of billions of dollars into WeWork, as it looked to turn the tide.

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