WeWork is slashing nearly 20% of its workforce, embarking on a painful restructuring of its money-losing operation that doomed its stock market debut and left the office-sharing company on the brink of bankruptcy.
WeWork said it has laid off 2,400 of its approximately 12,500 employees to “create a more efficient organization.” The job cuts began weeks ago in regions around the world and continued this week in the U.S, the company said in a statement Thursday.
The impact on WeWork in North Carolina is not yet clear.
A WeWork spokesperson declined to comment about reports of job cuts earlier this week.
WeWork has a large presence in the Research Triangle Park region as well as an operation in Charlotte.
Back in July, it opened its second office in Durham – WeWork Durham.ID – at 300 Morris Street.
The 80,000-square-foot office occupies three floors in the newly constructed seven-story Morris building, boasting sweeping views of downtown Durham and the iconic American Tobacco tower. That same week, WeWork also launched its Raleigh office – WeWork One Glenwood at 1 Glenwood Ave.
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It opened a third space in Charlotte in August.
That brings the sum total of WeWork locations to six in North Carolina, all this coming online in less than two years.
Initial reaction among investors to the layoff news was not positive.
“WeWork’s $669 million in bonds that come due in 2025 were trading on Thursday afternoon at a record low of less than 70 cents on the dollar, down from 80 cents earlier this month and $1.05 as recently as August,” reports venture capital news site PitchBook.
“That was back before Wall Street got a detailed look at WeWork’s IPO paperwork and started questioning the company’s approach to hefty losses and its chaotic corporate governance.”
WeWork said the employees who lost their jobs “are incredibly talented professionals,” but gave no details about which roles were cut.
In an email to employees earlier this week, executive chairman Marcelo Claure said jobs would be eliminated in areas that “do not directly support our core business goals,” referring to WeWork’s main office-leasing operations.
Outsourcing jobs
Additionally, about 1,000 cleaning and maintenance jobs in the U.S. and Canada are being outsourced to another firm that will contract the workers back to WeWork for the time being.
The New York-based company is scaling back the explosive growth that put its sleekly designed shared office spaces in 122 cities around the world while racking up massive losses that ultimately put off Wall Street investors and doomed its IPO.
WeWork is shedding side business and dumping or scaling back projects started under the grandiose but scattered vision of ousted co-founder Adam Neumann, including a Manhattan elementary school and the shared residential offering WeLive.
Claure plans to lay out a five-year turnaround a plan at company-wide meeting Friday amid employee anger over the mismanagement of a company that until recently had been the darling of the startup world, valued at $47 billion by private investors.
WeWork was saved from financial collapse with a $9.5 billion bailout from Japanese tech conglomerate Softbank, which now owns 80% of the company. That bailout reportedly valued WeWork at around $8 billion, devastating for many employees facing a reduction in the value of their stock options. Resentment grew following a $1.7 billion payout to Neumann, whose controversial corporate governance practices contributed to skepticism in Wall Street about WeWork.
In a letter to management last month, a group of WeWork employees said the unraveling of the IPO revealed “deception, exclusion and selfishness playing out at the company’s highest levels.” The group, calling itself the WeWorkers Coalition, asked that laid off employees be fairly compensated for lost equity, and that those who remain being given a bigger voice in the future of the company.
Of Neumann’s compensation package, the workers said, “we are not asking for this level of graft.”
“We are asking to be treated with humanity and dignity so we can continue living life while searching to make a living elsewhere,” the letter said.
About 275 employees are participating in the coalition’s private slack channel, said Alan Friedman, a senior software engineer who started the group with colleagues in New York last month.
Layoff details
In its statement, WeWork said the laid off employees will “receive severance, continued benefits, and other forms of assistance to aid in their career transition.”
Over the weekend, the WeWorkers Coalition raised a number of concerns regarding the future of the cleaning and maintenance employees who are being transferred on Dec. 9, including what would happen to their stock options and employer’s contribution to the 401(k) retirement savings plans for 2019.
The employees were sent the new job offers last week and were given until Monday to accept, although the outside company, JLL, said any employees who had not responded would be personally contacted to make sure they had seen the letter.
Workers who declined the offer would be considered to have voluntarily resigned, forgoing severance payments. The WeWorkers coalition objected to that requirement, saying workers were not given enough time to understand their new jobs.
Arik Benzino, WeWork’s managing director for the U.S. and Canada, told the affected workers in an email last week that their pay would remain the same and they would keep their shift assignments “for the time being.” The email did not address benefits or stock options. In a statement released this week, WeWork said the employees would receive a one-time lump sum payment equal to what they would have received as a 401(k) plan for the year.
WeWork faces a steep road to transform itself into a self-sustaining operation with a path toward profitability.
Spending ballooned as it geared up toward its doomed IPO, resulting in a record $1.25 billion in losses in the third quarter of 2019, eclipsing $934 million in revenue. It added 103 new office-sharing locations during that time period, meaning it is now saddled with the costs of building out many of those properties.
