The We Company's rapid unraveling reached another milestone this week as the office-space leasing company with the "transcendental" bent agreed to hand over the reins to SoftBank, its biggest backer, in a deal that valued the unicorn at just $8 billion, a fraction of the $47 billion valuation the company had maintained from a few weeks ago.
The massive bailout (SoftBank reportedly forked over $6.5 billion and a new executive chairman as part of the deal) arrived at a critical juncture. Because as it turns out, WeWork's need for cash is even more desperate than investors had initially believed, even after the publication of its pre-IPO prospectus.
The IPO was called off, of course, and just like that, $9 billion of badly needed financing ($3 billion to be raised in the IPO and a contingent $6 billion loan) evaporated.
Now, the company is reportedly in such dire straits that even after the buyout (money that mostly went to investors, including nearly $2 billion for Adam Neumann, the co-founder who was recently ousted from his position as CEO and is now severing all ties with the company, including stepping down from his position as executive chairman), it reportedly can't afford to move ahead with plans to move its headquarters to the former Lord & Taylor building off Bryant Park, according to the New York Post and Crain's New York Business.
That's hardly a surprise; earlier this month, anonymously sourced reports claimed that the lease had become "an albatross" for the company. Along with a group of investors that included its own then-CEO Adam Neumann, WeWork participated in the $850 million purchase of the Lord & Taylor building (right at what looks to be the top of NYC's commercial real-estate market).
Then, in a deal that reeked of self-dealing on behalf of the company's then-CEO, WeWork earlier this year signed a long-term lease to become the building's sole tenant, renting 660,000 square feet at the exorbitant rate of $105 a square foot (nearby buildings typically top out at around $80, according to the NYP).
Now, sources within WeWork’s real estate leasing business say they are ditching plans to make the former department store their headquarters. Instead, the company is rushing to lease the space as quickly as possible.
One source told the NYP that the company has accepted that trying to consolidate its headquarters at the Lord & Taylor building simply isn't practical.
"They know it makes no sense," the source said. "As a headquarters, they would have to clear out about 10 locations across the city and consolidate them."
Another source said the Lord & Taylor deal is "one of the thorniest deals left in WeWork's lap by Neumann."
"Adam pushed everything through as he was the majority owner on everything, and nobody ever said no to him," a source close to the company said. "The property fund is a huge conflict to the operating company. It was Adam’s way of profiting off the back of the money-losing side."