The coworking startup’s journey, from a failed IPO and poor leadership to rising share prices, makes a case for second chances in business.
It’s the classic tale of a CEO running a company into the ground by spending lavishly and recklessly, thus losing investors’ trust. WeWork’s Executive Chairman, Marcelo Claure, rightly noted, “This is a story with drama.”
After its failed IPO in 2019, the American coworking startup WeWork took another chance and became a publicly traded company on October 21, 2021. The company went public via a merger with BowX Acquisition Corp., a SPAC or a special-purpose acquisition company. This merger was announced in March 2021. Claure told CNBC, “We got here on a different road than we anticipated, but we’re here.”
WeWork’s journey is a cautionary tale for startups that want to go public. It emphasizes the importance of not only having a good business model but also leadership.
What happened with WeWork in 2019?
Supported by the multinational company SoftBank, the company had a valuation of US$47 billion in 2019. That’s until they decided to go public. Investors were concerned about the company’s spending habits and the leadership style of then-CEO Adam Neumann. Consequently, it dropped its plans to go public, and its valuation fell to a mere US$10 billion in a month. SoftBank’s CEO, Masayoshi Son, admitted to being “foolish” about investing in WeWork. “We made a failure on investing in WeWork,” he asserted. Claure is also of the opinion that the way WeWork used their investment “was a mistake”.
The path to recovery
This time, the company has given due attention to all these factors. In a press release, the company disclosed that WeWork has made “significant progress” in transforming their business with a focus on “cost-management and smart digital innovations.”
Besides ousting Neumann—who was also accused of using company funds for personal pleasures—WeWork exited all of its “non-core ventures”, thus cutting its costs. In addition, the company exited over a hundred underperforming locations globally in December 2020. They also executed numerous “lease amendments for rent reductions, deferrals, or tenant improvement allowances”. In doing so, they saved US$4 billion in future lease payments.
The CEO of WeWork, Sandeep Mathrani, shared, “WeWork has spent the past year transforming the business and refocusing its core, while simultaneously managing and innovating through a historic downturn. As a result, WeWork has emerged as the global leader in flexible space with a value proposition that is stronger than ever.”
The promise of a future
The company is counting on the growing demand for flexible workspaces to steer WeWork in the direction of success. Claure expounded, “One size fits all is dead. The corporate headquarters as we knew it, 9-5, five days a week, corporate HQ, I don’t think we’re ever going back to that.” That’s where WeWork will step in as the solution.
From nearly claiming bankruptcy to starting afresh with rising share prices, WeWork has come a long way. Claure declared, “This company is here, is stronger than ever, and no doubt that we’re going to be celebrating many more milestones.” Whether its new leadership and updated business strategies will give WeWork a happy ending, only time will tell.
To know more about how SPAC IPOs work, check out this article.
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