What is going on at WeWork?

The company has been on a downward spiral, and poor corporate governance has been at the heart of its problems. Bad strategy mixed with bad leadership has spelled disaster.

Is this the end of the WeWork? It could very well be. Let’s analyse.

• WeWork announced in August 2023 that it had “substantial doubt about our ability to continue as a going concern.”
• The company has acknowledged severe issues with cash flow and being able to turn a profit. 
• If it doesn’t solve those issues, it may consider anything from more debt, debt restructuring, decreasing activities to selling off assets and bankruptcy. 
• WeWork has hit the news for headlines like this before. 
• Share prices have tumbled from a record high of US$13.02 in 2021 to around $0.25 in August 2023.

Governance is at the heart of WeWork’s collapse, and it hasn’t been just one issue. 

The woes up till now have included overspending, unsustainable costs, a botched IPO in 2019, and eccentric, downright poor leadership of former CEO and founder Adam Neumann, who the board removed some years ago. 

With this expression of doubt about the company’s future, three board members have resigned over disagreements about governance. 

In short, confidence is one of the last things you’d expect to find among the people at the top. 

We’ll need to wait for the answer, but you’ll be forgiven for thinking that the company is on its way out. 

That said, it remains determined to restructure. So, entertaining that mindset for a moment, the solution lies in reigning in activity so it can boost the cash in the bank. This, ultimately, is the difference between success and failure. 

The company needs to take a serious look at the collection of property it has/rents worldwide and re-work its relationship with those properties to create a more sustainable business model.

Probably not. The Wall Street Journal has reported that the four board members brought in to replace recent departures are well-versed in guiding companies through tough times and bankruptcies. 

For what it’s worth, that move makes sense. 

Boards must always ensure they have the right skill sets and experience to navigate a crisis properly. Ideally, though, these people should be in place ahead of time. What WeWork is doing now may be too late. 

Ultimately, the current board cannot get away from the mistakes of past directors – the ones who allowed Neumann to continue as CEO as long as he did, the ones who oversaw continuous spending bonanzas and unsustainable expansion in the name of rapid growth. 

If the current board desires to move away from that, they will likely ensure a complete revamp of strategy in the next twelve months.