The WeWork logo is displayed outside of a co-working space in New York City, the United States, Jan 8, 2019. (Photo: Agencies)
WeWork, once a highly anticipated IPO valued at $47 billion, announced 2,400 job cuts Thursday as part of a restructuring plan led by Japanese conglomerate SoftBank to trim expenses.
The layoffs in New York City represent about 16.55 percent of the shared office-space company's 14,500 employees and came after its failed IPO and an agreement to pay founder Adam Neumann $1.7 billion to walk away.
WeWork's layoffs do not include about 1,000 cleaning and facilities employees whose jobs will be transferred to an outside vendor or 1,000 employees who work at recently acquired but non-core companies.
Stock options offered to employees as part of a package to entice them to join the company are now worthless.
Earlier this year, major investment banks, including Goldman Sachs, Bank of America, Citigroup and Barclays, lined up to underwrite the deal. The New York Stock Exchange and Nasdaq competed for WeWork's listing.
WeWork expected to raise about $10 billion in its IPO and planned to use the money to expand. But without the IPO, the company nearly ran out of cash.
In its IPO registration statement, WeWork said: “We pioneered a ‘space-as-service' membership model that offers the benefits of a collaborative culture, the flexibility to scale workspace up and down as needed and the power of a world-wide community, all for a lower cost. We have disrupted the largest asset class in the world — real estate.”
Despite its lofty goals and rhetoric, WeWork never developed a clear path to profitability. The company leased and renovated buildings worldwide, but cost always outstripped income. In November, it said losses totaled $4.7 billion. The company's valuation shrank to about $7.8 billion.
WeWork typically signs 15-year leases for the buildings it renovates, and on June 30, the cost of its leases totaled $47.2 billion.
In January, SoftBank invested about $10.3 billion in the company when its valuation and IPO prospects were high. But WeWork withdrew its planned IPO in October, and SoftBank assembled a $9.5 billion bailout of the company.
The rescue package increased SoftBank's stake in WeWork to 80 percent from about 33 percent.