WeWork plans to file for bankruptcy as early as next week, according to a source familiar with the matter cited in a Reuters report on Tuesday. The struggling flexible workspace provider has seen its valuation plummet and losses mount in recent years.
According to the Reuters report, WeWork is considering filing for Chapter 11 bankruptcy protection in New Jersey. This comes after the company entered an agreement with creditors to temporarily postpone some debt payments.
Chapter 11 bankruptcy involves the reorganization of a company's debts even as it continues to operate, unlike Chapter 7 bankruptcy which requires liquidation of assets.
The debtor proposes a reorganization plan which must be approved by creditors and the bankruptcy court. This plan allows the business to emerge from bankruptcy as a viable entity. Existing management often continues to run the day-to-day business operations during the bankruptcy process.
WeWork has been struggling financially, with the Reuters report noting it had $2.9 billion in net long-term debt as of June and over $13 billion in long-term leases. The company's failed IPO in 2019 and need for billions in investment from SoftBank have highlighted its difficulties.
Shares of WeWork fell 32% in extended trading after the Reuters report, which cited people familiar with the bankruptcy plans. The company's filing would represent a major turnaround after it was valued at $47 billion privately in 2019.
WeWork raised doubts about its ability to continue operating in an August filing. The company has seen numerous executives, including CEO Sandeep Mathrani, depart this year amid its troubles.
Meanwhile, WeWork India will not be impacted by the bankruptcy filing of the parent, several news reports quoting WeWork India officials said.
Since starting operations in India in 2017, WeWork India has rapidly expanded its footprint across major cities. The Indian subsidiary of U.S.-based WeWork now has approximately 6.5 million square feet of office space located in New Delhi, Gurugram, Noida, Mumbai, Bengaluru, Pune and Hyderabad.
WeWork India competes in a crowded coworking space market against rivals like IndiQube, Awfis, 91Springboard, CoWrks and Smartworks. The company is facing stiff competition for market share as demand grows for flexible, shared office spaces.