WeWork, once the darling of the tech world for its branded co-working spaces, is facing rough roads ahead. To lighten its load in these turbulent times, reports indicate WeWork may lay off up to 5,000 staffers.
Issues at WeWork began a few months ago, when it filed the S-1 paperwork for an IPO. Its parent company, “The We Company,” showed massive financial losses and a befuddling corporate structure topped with its then-CEO and founder Adam Neumann as the sole beneficiary. It was objectively very weird: Neumann owned the “WeWork” moniker and licensed it back to the company; he also owned property that he then leased to the company.
The S-1 filing also revealed Neumann would have had ten times the voting power of any other stockholder, and that his wife Rebekah was embedded in the succession planning. After a Wall Street Journal report highlighted Neumann’s recreational drug use and desire to become Israel’s Prime Minister, both he and his wife stepped away from the company.
Of the most eyebrow-raising revelations in the S-1 filing was WeWork’s $47 billion valuation. Reports now indicate it will try again for a 2020 IPO in the neighborhood of a $10-15 billion valuation. “We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong,” new co-CEOs Artie Minson and Sebastian Gunningham said in a statement. “We are as committed as ever to serving our members, enterprise customers, landlord partners, employees and shareholders. We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future.”
In the aftermath, Minson and Gunningham, as well as co-founder Miguel McKelvey, have been holding meetings with employees. In one such meeting, the trio reportedly told staffers cost-cutting measures would include layoffs.
Currently, there are conflicting reports on just how many may lose their job at WeWork. A report from The Information notes the company is eyeing layoffs possibly totaling 5,000 employees (roughly one-third of the 12,500 or so who currently work there). A more recent report from Bloomberg notes the layoffs could number around 2,000, with cuts expected to land sometime this month.
In addition to the job cuts, WeWork is said to be exploring the sale of its Meetup, Managed by Q, and Conductor brands. It will also eliminate its annual WeWork Global Summit, a flashy soirée that served no apparent purpose.
A critical way to look at these goings-on: WeWork was exposed as fraudulent, and Neumann’s ouster is indicative of that. A more positive spin: WeWork is now free to hone-in on what it’s known for, which is leasing office space to small and medium-sized businesses, as well as those larger firms transitioning between permanent spaces. Time will tell how effective this strategy proves. Earlier this year, we wondered if WeWork existed in a bubble; sooner rather than later, we may find out.