WeWork has been the subject of a documentary, a television series, books, and many a news story—but it’s still interesting to see the company’s newly-appointed CEO, David Tolley, offer his own narration of how one of the world’s most valuable startups ended up in bankruptcy.
Yesterday Tolley, an 11-year Blackstone veteran, did just that. In a 180-page declaration that was filed into New Jersey Bankruptcy Court yesterday afternoon as part of WeWork’s Chapter 11 proceeding, Tolley laid out a pretty detailed timeline of the company’s history—all the way from its founding story, to its botched IPO, its SPAC merger, and troubles from the COVID pandemic. He even discussed in a footnote some of the side projects WeWork cofounder Adam Neumann had experimented with (remember his fitness center venture—Rise by We?).
After CEO Neumann resigned in 2019 over the company’s failed IPO, new management had tried to focus on long-term profitability. They were shortly greeted by the COVID pandemic, which sent people working from home and left offices empty. WeWork memberships declined severely. And then rising interest rates led real estate owners to drop rent and sell office space for cheap—upping competition for WeWork.
“WeWork lacks the necessary financial flexibility to adjust to the rapidly shifting commercial real estate market,” Tolley wrote in his declaration. WeWork’s CEO said that the company is amending 590 leases it has with property owners, reducing future rent obligations by over $12 billion, according to the bankruptcy filings. The company is working to up that number by another 400 leases, too.
But none of that will be enough to pay back the more than 100,000 creditors to which the company owes money. Documents show WeWork has $15 billion of assets—and over $18 billion of liabilities.
Tolley, of course, added his own attempt at a positive spin to the bankruptcy: “As WeWork emerges from these Chapter 11 cases, it will be particularly well-positioned to capitalize on this revenue growth opportunity with a global portfolio of profitable leases, well-established market connections, and most importantly, a community united by passion and entrepreneurship. These Chapter 11 cases are the next step in that journey.”
But it may be hard for the rest of us—and particularly for WeWork’s investors—to see this as a good thing. Bankruptcies wreak havoc on a company’s shareholders, as the stock becomes effectively worthless. It’s nothing short of incredible to see WeWork, which was valued by SoftBank at $47 billion just four years ago, now being delisted from the New York Stock Exchange, with a judge in charge of deciding which of WeWork’s lenders will get paid back what. Bloomberg estimates that SoftBank has suffered from $11.5 billion in equity losses and another $2.2 billion in debt could still be on the line.
As for Neumann, he said in a statement Monday evening that it’s “been challenging for me to watch from the sidelines since 2019 as WeWork has failed to take advantage of a product that is more relevant today than ever before.”
“I believe that, with the right strategy and team, a reorganization will enable WeWork to emerge successfully,” he said.
In other news…Coatue has cut the value of its OpenSea shares by 90%, according to a report yesterday in The Information. My colleague Ben Weiss reported that mere days after OpenSea laid off half its staff, executives at the crypto company embarked on a company retreat to a $9 million mansion once owned by Katy Perry and Russell Brand. Sounds nice.
See you tomorrow,
Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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