You(No Longer)Work: Job losses at workspace provider WeWork
January 15, 2020
2 min read
What's going on here?
WeWork has announced that 2,400 employees will be let go, in an effort to halt its growing losses.
What does this mean?
WeWork, the troubled office rental company, is cutting 2,400 jobs globally. These long-anticipated layoffs come as SoftBank push WeWork to restructure and refocus the company on its core business, following its dramatic collapse earlier this year. SoftBank is a Japanese technology company who provided a $9.5 billion lifeline to WeWork in exchange for an 80% stake in the company earlier in 2019.
What's the big picture effect?
In January, WeWork was valued at $47 billion. Since then, the company has been floundering. WeWork shelved an initial public offering (IPO) (see our article on the proposed IPO here, and our other article on how the withdrawal of the IPO here) and has gone from being the US’s most valuable private company to standing on its last legs. The main reasons for the failure of its IPO were growing concerns from investors over its business model, corporate governance processes and recent losses.
However, one of the biggest concerns was the leadership of its co-founder Adam Neumann, who resigned as CEO following the announcement of WeWork’s IPO. Neumann began investing company money into personal projects, for example, by setting up a school, with no real interest in turning a profit for the company. Despite WeWork’s financial troubles, Adam Neumann is set to receive a $1.7 billion severance package.
These job cuts are another sign that the shared workspace provider is struggling to survive. In a recent statement, WeWork claimed that “as part of our renewed focus on the core WeWork business, and as we have previously shared with employees, the company is making necessary layoffs to create a more efficient organisation”. This has all been done at the expense of 20% of WeWork’s global workforce. Nonetheless, the company’s losses are still set to grow, due to many expensive long-term leases, commitments to expand into several different sites and the rapid rate at which cash is being spent.
Many current and former employees are unhappy with the severance packages being provided and have consequently formed the WeWorkers Coalition. As stated in an open letter to managers, the Coalition said that they “believe that the company is not following through on its promise to treat employees with “dignity and respect” during this restructuring process. Our hard-working colleagues deserve better than this”. Overall, WeWork’s prognosis does not look favourable. It remains to be seen whether the company will be able to recover from such a spectacular downfall.
Report written by Sarina Johal
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