Office sharing company WeWork – once regarded as one of the most valuable start-ups – has filed for bankruptcy in the US.
The company, which rode the waves of the venture capital boom of the late 2010s with a promise to revolutionise flexible workspace, was valued at $47bn (£38bn) at its height.
But its shares have plummeted about 98.5% so far this year amid a struggle with expensive leases and clients cancelling because of a trend toward employees working from home in the wake of the coronavirus pandemic.
The company filed to the New Jersey federal court on Monday, seeking a Chapter 11 bankruptcy protection order.
Such a move aims to give a company breathing space for a limited time so it can attempt to sort out its finances.
In a statement on Monday night, the company said it had entered into a restructuring support agreement with stakeholders to “drastically reduce” the company’s debt.
Analysis: The rise and fall of WeWork
A WeWork spokesperson said about 92% of the company’s lenders had agreed to convert their secured debt into equity under the agreement, wiping out about $3bn (£2.4bn) of debt.
The company is also seeking to restructure around $13bn (£10.5bn) in lease obligations.
“The company maintains the strong support of its key financial stakeholders,” it said in a statement.
David Tolley, CEO of WeWork, said: “Now is the time for us to pull the future forward by aggressively addressing our legacy leases and dramatically improving our balance sheet.
“I am deeply grateful for the support of our financial stakeholders as we work together to strengthen our capital structure and expedite this process through the restructuring support agreement.
“We remain committed to investing in our products, services, and world-class team of employees to support our community.”
Read more from Sky News:
British Steel to shut down blast furnaces
Judge orders seizure of £677m from Airbnb
The company, which also intends to file recognition proceedings in Canada, said it expected to have the financial liquidity to continue business normally.
It said its locations outside the US and Canada, as well as its franchisees around the world, were not affected by the proceedings.
The company had raised “substantial doubt” about its ability to continue operations in August, with numerous top executives, including former CEO Sandeep Mathrani, departing this year.
The business was founded in New York in 2010 by Adam Neumann, who had tapped into an environment after the financial crisis of more collaborative working.
It targeted young workers, particularly in the tech sector, kitting out its light, airy, serviced workspaces with luxurious lounges and free coffee and beer on tap.
The company reached its peak when, in January 2019, the Japanese tech investor SoftBank invested $2bn (£1.2bn) at a price valuing WeWork at $47bn (£38bn).
Its flotation ambitions were realised in 2021, but at a substantially reduced valuation to what it achieved as a private firm.
Since then, it has been unable to shake off investor concerns over its business model of taking long-term leases and renting them for the short term.