Progress Report: WeWork 90 Days After Announcing A 90-Day Turnaround Plan
SoftBank Group CEO Masayoshi Son claimed turning WeWork around would be simple, but the two months since his company took control have proven to be just the start of a long process.
Jan. 9 marked 90 days since WeWork gave a presentation to investors laying out a 90-day plan to pull the company out of the spiral that began with its disastrous IPO filing. The PowerPoint was shown Oct. 11, when the company was in negotiations for a bailout loan from JPMorgan Chase, Pitchbook reported.
But when SoftBank took over majority ownership in early November, the 90-day time frame was quietly discarded, a WeWork spokesperson confirmed to Bisnow.
"In November, WeWork's new executive leadership laid out the company's go-forward strategy, focused on delivering strategic and profitable growth and an exceptional experience for our members," the spokesperson said in a statement. "We continue to execute on this plan and serve our members as the world’s leading co-working and space-as-a-service platform."
In the two months since SoftBank's takeover, WeWork has enacted some tangible changes:
- The layoff of 20% of the company's global workforce.
- A dramatic slowdown on new leases.
- The sale of search engine optimization firm Conductor back to its founders.
- The shuttering of side projects started by co-founder Adam Neumann and/or his wife, Rebekah.
SoftBank installed Marcelo Claure as executive chairman soon after it took ownership in November, though Artie Minson and Sebastian Gunningham have remained as co-CEOs since Neumann was removed from power. Claure's "go-forward plan" published on WeWork's website on Nov. 22 showed considerable overlap with the October presentation, albeit with fewer specifics.
Both plans prioritized stemming the company's prodigious losses, which reached $1.25B in the third quarter alone, by focusing on its core business of subleasing and managing stylish office space on flexible terms for companies of any size. WeWork's October presentation called Neumann's forays into other areas "distracted" and "founder-driven," and Claure's plan listed "execute the core business brilliantly" as one of its six main pillars.
Every iteration of WeWork leadership has insisted its coworking model can be a profitable one. To get the company in the black, Claure set broad goals focusing on trimming the company's business in terms of acquisitions, employee count and pace of expansion.
Divesting from non-core businesses
WeWork's October plan specifically mentioned businesses it had acquired or invested in under Neumann and would look to sell, including Meetup, female-focused coworking operator The Wing, wave pool company Wave Garden and office management startup Managed by Q.
So far, WeWork has only been able to offload Conductor by selling its stake back to the company's founders. As of mid-December, WeWork was still in negotiations with Managed by Q's founders to do the same for $55M, 25% of what it paid to acquire the startup only eight months before, Bloomberg reports.
As for ventures that originated within the company, they appear to have been ended as quickly as possible. Entrepreneurship-focused elementary school WeGrow, seen within the company as the pet project of Neumann's wife, Rebekah, closed the same day WeWork presented its 90-day plan to investors — reportedly with no warning to parents.
Slamming the brakes on expansion
All the way through its doomed IPO, WeWork's appetite for leasing space only grew more voracious — the company's third quarter was its most prolific ever in terms of both leasing and bringing desks online. After a brief flirtation with a freeze on new leases in September, the company managed to severely cut back by the end of the year.
WeWork leased 64K SF in its hometown of New York in Q4, according to CoStar data reported by Bloomberg, its slowest quarter in the city for over five years. Likewise, WeWork took 49K SF in London, or less than it had in any quarter since Brexit in 2016. Similar stories have been playing out in Washington, D.C., and elsewhere.
Plenty of landlords have been happy to wash their hands of WeWork, but under Claure's leadership the company is reportedly trying to go even further, negotiating to back out of as many as 100 previously signed leases.
WeWork will be feeling the effects of its rapid expansion for some time, as it was too far along on many of the properties it had leased to back out. New offices will keep coming online and working their way toward profitability, which WeWork has told investors takes two years to accomplish.
Layoffs and a new approach to staff
One of the most public and predictable moves WeWork has made to cut costs in the wake of SoftBank's acquisition was to lay off 2,400 workers, or 20% of its global employee headcount. Its staff of 1,000 maintenance and service staff that manned its offices was transferred to JLL while retaining their posts.
The exact breakdown of what parts of the company layoffs came from has not been publicly disclosed, but WeWork's October presentation said the layoffs would be focused on departments dealing with the location and development of new offices, and that community staff would not be affected by impending job cuts.
Claure's plan added changes to how the company would operate toward workers it is keeping and will hire in the future, calling the new method an "ownership model." From now on, employment contracts at WeWork will come with a "competitive base salary, an annual cash bonus, and long-term incentives," his announcement read.
WeWork employees, especially those who had been around since the company's early days, accepted contracts light on salary and heavy on equity in the company, making the collapse of its valuation especially painful. Claure offered to purchase equity back from any interested employees, including those recently laid off, at the company's current valuation of around $8B.