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Wework Fallout – What Really Happened

WeWork is one of the world’s largest office space landlords in the United States and the United Kingdom with over 10 million square feet of space.

In just those two countries and yet there is more around the world. WeWork definitely dominated the real estate industry when it came to office spaces and layouts.

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WeWork has created a better working space for many fortune 500 companies and many start-ups who look for quality, serine and a proper environment for its employees.

It has over 14,000 employees which show it had a high on productivity levels and quality.

Sadly, all these good tidings are completely clouded by the recent fallout of the company that is over 14 years old. The giant company announced that it will be laying off up to 6,000 employees.

The Beginning Of The End

In January this year, the company was valued at a whopping $47 million. In the course of the year in its thirds quarter, around October, the biggest but unexpected news was received.

Through the stewardship of now-former CEO Adam Neumann, the company had been registering major losses.

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By the time it got to October, the company was valued to be less than $10 billion.

WeWork had started posting losses from 2018 but jumped to over one hundred percent loss later in the third quarter of this year.

Not so long ago, former CEO got laid off by angry investors who put it to a vote following poor management allegations. Now he is a non-executive board member.

It is said that the more successful a company is in the capital grid, unit economics and gains in profit is the main focus for investors.

WeWork suffered a great deal later investors pulled out funding after the company went public with an IPO that went over and above $12 billion.

WeWork got tangled up in the overvaluation of its stocks just as it is happening in the Silicon Valley.

The Founder

Softbank’s founder Mr. Son kept on pumping money or rather investing big on WeWork from 2018 which dovetailed it from $20 billion to $47 billion. This is where the problem all began.

Investors were not pleased by the overvaluation. The big names in Wall Street; Goldman Sachs, J.P. Morgan, and Morgan Stanley waltzed in and promised to heighten their valuation up to $100 billion.

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WeWork decided to go with the not so well advised Initial Public Offering (IPO) that almost crippled it and its finances because of its vigorous expansion and pending obligations on leases.

Other factors that contributed to the fall of WeWork were the fall of real-estates making it cheap leading to landlords lowering their prices.

The financial crisis that hit the United States is another factor, the cost of living forced to go up. This has led to the cutting of costs which includes companies to sort for downsizing to save money.

The Debt

If WeWork worked and traded with a valuation of $12 billion to the public instead of the initially farfetched IPO of $47 billion, it would have gone public and would be registering major profits.

Softbank has not relented in uplifting the falling WeWork since with all its financing, the Japanese company rescued WeWork with a package valued at $5 billion.

Not forgetting the funds that were originally injected to put WeWork’s valuation at $47 billion, it is believed that Softbank now owns close to 80% of WeWork. Mr. Son is still putting in money despite the bleeding of funds by Softbank.

Overvaluation, greed and instant wealth acquisition by investors has caused very many companies to go under. Ousted WeWork boss is, on the other hand, walking away with a huge Christmas gift even if its employees are going to be laid off.

Adam Neuman was relieved of his duties and was offered up to $1.8 billion as a send-off, buy from him up to $1 billion worth of stock from the parent company, The We Company.

He was also given an extended $500 million credit line to allow him to pay back his loan from J.P. Morgan and over $180 million as consulting fees.

There is an outcry by employees who are going to be laid off siting the huge compensation their former boss is receiving. Despite all this, there is hope that with the new valuation and restructuring, it will be able to grow.

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