Charted: The Rise and Fall of WeWork
Despite its recommitment to core business fundamentals in the last few years, WeWork’s management—which saw a shakeup in May 2023 when CEO Sandeep Mathrani departed—is setting off a signal flare about the company’s future.
“Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern.” — WeWork, SEC filing, August 8th, 2023.
But how did the once-poster child of Silicon Valley end up seeing its valuation collapse more than 99% from its peak?
Pulling together data from Business Insider, YCharts, SEC Filings, and Crunchbase we follow the rise and fall of WeWork since 2011.
The Rise of WeWork: 2010–2019
WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey with the primary objective of providing shared workspaces catered to freelancers, startups, and companies seeking “flexible office solutions.”
The business model, which rested on renting space from developers long-term, renovating and parceling the property, and subsequently leasing it out to short-term clients, thrived in a decade of low interest rates.
Its valuation surpassed $1 billion in 2014, earning the coveted “unicorn” status. In 2017, SoftBank Group made the first of its total $18.5 billion investment in the company. Two years later, WeWork hit a peak valuation of $47 billion with SoftBank’s continued investments, raising expectations for an imminent IPO.
|July, 2012||$97 million|
|May, 2013||$440 million|
|February, 2014||$1.5 billion|
|October, 2014||$5.0 billion|
|June, 2015||$10.2 billion|
|October, 2016||$16.9 billion|
|August, 2017||$21.2 billion|
|January, 2019||$47.0 billion|
|August, 2019||$20-30 billion|
|September, 2019||$10-12 billion|
|October, 2019||$8.0 billion|
|December, 2019||$7.3 billion*|
|March, 2020||$2.9 billion*|
|March, 2021||$9.0 billion|
|October, 2021||$9.0 billion|
|August, 2023||$0.4 billion|
Footnote: *SoftBank valuation is based on discounted cash flow method.
The Fall of WeWork: 2019–2023
Intensive scrutiny fueled by the impending IPO raised several questions for the company. These included concerns around Neumann’s leadership style, excessive spending, creative accounting, and conflicts of interest leading to Neumann’s resignation and delay of the IPO.
In October 2019, SoftBank Group acquired 80% of the company with $5 billion of additional funding. A month later WeWork laid off 2,400 employees, nearly one-fifth of its workforce.
Real estate veteran Sandeep Mathrani was made CEO in 2020, tasked with turning the company around by eliminating recurring costs and restructuring its debt.
That same year the COVID-19 pandemic forced a significant shift to remote work, causing a decline in office space demand. WeWork’s business model, focused on shared physical spaces, faced a substantial challenge.
In 2021, WeWork went public through a SPAC merger, aiming to regain investor trust. The listing reflected a revised strategy focusing on key markets, cost optimization, and a pivot toward catering to larger corporate clients with hybrid work needs.
Over the past two years, its market capitalization as a publicly-traded company has plummeted from $9 billion to under half a billion dollars. WeWork disclosed $11.4 billion in net losses from 2020 through to June 30th, 2023 in their recent SEC filing.
What Happened to WeWork?
Aside from the trials and tribulations of former CEO Adam Neumann, the company’s sustainability itself has been questioned several times over the past decade. In 2019, the Guardian summarized the criticism succinctly by saying, the company was “renting long and subleasing short,” which left it “exposed to risk.”
Post-pandemic, the proliferation of work-from-home policies, along with the rapid rise in global interest rates in the last year—which can reduce cash flows for the commercial real estate industry—have magnified those risks.
WeWork is now battling an environment of excess supply, softer demand, increased competition and macroeconomic volatility, according to interim CEO David Tolley.
“It was foolish of me to invest in WeWork. I was wrong.” — Masayoshi Son, SoftBank Group founder.
The New York Times says that WeWork has more than 18 million square feet of rentable office space in the U.S. and Canada alone and that its failure could have a “sizable impact” on the commercial real estate industry.
At the same time, the Times notes that reporting the “substantial doubt” on continued business operations might help the company buy time with lenders to seek additional capital through issuance of debt, equity, or the sale of assets.
Visualizing the Rise of the U.S. Dollar Since the 19th Century
This animated graphic shows the U.S. dollar, the world’s primary reserve currency, as a share of foreign reserves since 1900.
Visualizing the Rise of the U.S. Dollar Since the 19th Century
As the world’s reserve currency, the U.S. dollar made up 58.4% of foreign reserves held by central banks in 2022, falling near 25-year lows.
Today, emerging countries are slowly decoupling from the greenback, with foreign reserves shifting to currencies like the Chinese yuan.
At the same time, the steep appreciation of the U.S. dollar is leading countries to sell their U.S. foreign reserves to help prop up their currencies, in turn buying currencies such as the Australian and Canadian dollars to help generate higher yields.
The above animated graphic from James Eagle shows the rapid ascent of the U.S. dollar over the last century, and its gradual decline in recent years.
Dollar Dominance: A Brief History
In 1944, the U.S. dollar became the world’s reserve currency under the Bretton Woods Agreement. Over the first half of the century, the U.S. ran budget surpluses while increasing trade and economic ties with war-torn countries, expanding its influence as the world’s store of value.
Later through the 1960s, the U.S. dollar share of global foreign reserves rapidly increased as political allies stockpiled the dollar.
By 2000, dollar dominance hit a peak of 71% of global reserves. With the creation of the European Union a year earlier, countries such as China began increasing the share of euros in reserves. Between 2000 and 2005, the share of the dollar in China’s foreign exchange reserves fell by an estimated 15 percentage points.
The dollar began a long rally after the global financial crisis, which drove central banks to cut their dollar reserves to help bolster their currencies.
Fast-forward to today, and dollar reserves have fallen roughly 13 percentage points from their historical peak.
The State of the World’s Reserve Currency
In 2022, 16% of Russia’s export transactions were in yuan, up from almost nothing before the war. Brazil and Argentina have also begun adopting the Chinese currency for trade or reserve purposes. Still, the U.S. dollar makes up 80% of Brazil’s reserves.
Yet while the U.S. dollar has decreased in share of foreign reserves, it still has an immense influence in the world economy.
The majority of trade is invoiced in the U.S. dollar globally, a trend that has stayed fairly consistent over many decades. Between 1999-2019, 74% of trade in Asia was invoiced in dollars and in the Americas, it made up 96% of all invoicing.
Furthermore, almost 90% of foreign exchange transactions involve the U.S. dollar thanks to its liquidity.
However, countries are increasingly finding alternative options than the dollar. Today, Western businesses have begun settling trade with China in renminbi. Looking further ahead, digital currencies could provide options that don’t include the U.S. dollar.
Even more so, if the U.S. share of global GDP continues to shrink, the shift to a multipolar system could progress over this century.
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