WeWork's Journey Back from the 'Madness'

If failure is a better teacher than success, then WeWork has had one valuable education. Two years after the company had to pull an initial public offering and came to the brink of bankruptcy,  the flexible office-subleasing upstart has finally made its public market debut. 

A merger with a special purpose acquisition company, or SPAC, BowX Acquisition Corp., first announced in late March, has made that possible. WeWork shares climbed 13.5%, to $11.78 , in their first day of trading today on the New York Stock Exchange, giving the company a market value of $9.3 billion. 

The hyper-aggressive expansion, the hubris, the $47 billion valuation, the vow "to elevate the world's consciousness," the peculiar cereal box left on the then-CEO's private jet --  WeWork has put this history behind it. SoftBank Group, then the start-up's loudest champion, remains its biggest investor after sustaining an embarrassing black eye and a $8.2 billion write-down on its stake.

WeWork is now leaner, more focused, and has cut most of its ties with co-founder and former CEO Adam Neumann. It recently reported revenue of $593 million for its second quarter, down from $882 million in the quarter a year ago, but narrowing its loss to $923 million for the quarter, from $1.1 billion a year ago.

Barron's Eric J. Savitz talked to the executive who led the salvage operation and turnaround of WeWork, Marcelo Claure, its executive chairman. Here's what Claure had to say: 

“What Adam [Neumann] did was madness, opening close to 1,000 buildings in two years,” he told Barron’s. “There was this mentality of growth at all costs, but it wasn’t all Adam’s fault.” Claure said his boss — SoftBank CEO and founder Masayoshi Son — is at least partially responsible. “Masa was at fault too. But Masa learned his lesson. We were all mature enough to learn from our failures.”

Yet the bet on a revamped WeWork is not just that it has slashed expenses and is more prudent about its growth. It is that Neumann's vision for the workplace may find support as the pandemic has emptied office buildings and challenged the traditional model of long-term leases in commercial real estate. Companies could decide that flexible office arrangements are much more cost-effective. It is still a gamble, however, as companies may also conclude that the WeWork offering is not enough of an alternative, given that many of their employees will continue to work from home.

Claure, not surprisingly, is upbeat on the challenges ahead: 

Claure thinks the company is now enjoying “amazing tailwinds,” aided in part by the hybrid work trend that has emerged from the pandemic period. “I could not be more optimistic about the business,” he said. Claure asserts that over time flexible workspaces will account for 30% of the commercial office market, up from 1% to 2% today.

So Neumann's vision may survive. He also remains a substantial shareholder in WeWork, with a voting stake of roughly 11% and the ability to observe board meetings. Today, Neumann was celebrating WeWork's listing, according to the Financial Times, holding a party  for more than 100 of the company's earliest employees at the Standard Hotel in Manhattan -- about two-and-a-half miles from the New York Stock Stock Exchange.