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WeWork Signals That They Will Likely File for Bankruptcy

WeWork is a company that provides office space to other companies. Its net worth at one point was estimated at $40 billion. However, a number of pressures have forced the company to consider filing for bankruptcy. These include the COVID-19 pandemic, which caused many employers to operate with remote personnel and exit their leases with the company that owned the real estate. 

Today, the company’s stocks are trading at less than one dollar. The company is struggling with liquidity issues, is not generating enough cash, and is heavy on debt liabilities. The company has signaled that it may file under Chapter 11. This could potentially leave numerous employees out of work as the company downsizes. 

Once a $40 billion dollar company, WeWork’s stock is now trading at around 15 cents. Its market cap is below $500 million. In 2022, the company lost $2.3 billion in value. In the first quarter of 2023, the company lost an additional $700 million.

What Happened to WeWork?

Financial mismanagement and overspending are blamed for WeWork’s current situation. The company spent too much money and saw minimal gains as more companies moved to remote operations. These companies were bleeding money in rental costs, so they found a cheaper solution. This hit WeWork hard as their business model depends on leasing brick-and-mortar office spaces to companies. 

The company now faces liquidity issues as it struggles to meet its debt obligations to its creditors. 

Chapter 11 Bankruptcy

Chapter 11 is a type of bankruptcy that is available to both companies and individuals. When a company files under Chapter 11, its debts are restructured and consolidated. The company may be offered a bankruptcy loan to help it through a difficult period. 

Individuals filing under Chapter 11 are generally those who make too much money to file under Chapter 7 and owe too much money to file under Chapter 13. In these cases, Chapter 11 remains their only recourse for bankruptcy protection. Filing a Chapter 11 bankruptcy is much more difficult and costly for an individual. That is why it is generally avoided when other options remain on the table.

Companies cannot file under Chapter 13. If they file under Chapter 7, the business is wholly liquidated in order to repay creditors. Chapter 11 remains their only recourse. In Chapter 11, the company can begin the process of repaying creditors. However, it hurts their stock prices and drives down confidence that the business will remain solvent. 

Issues with companies often present a cascade effect on their employees. WeWork is likely to downsize as a result of their financial struggles, and this could leave many of their employees without income. Personal bankruptcies often follow company bankruptcies. So, the two are connected.

Contact an Indiana Bankruptcy Attorney Today

Chris Arrington represents the interests of individuals and businesses filing for bankruptcy. Call our office today to schedule an appointment, and we can begin discussing how to get yourself out of debt and start fresh. 

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