WASHINGTON (AFP) | Embattled office sharing firm WeWork will lay off 2,400 employees worldwide – about a fifth of its workforce – as it struggles to reorganise amid mounting losses, the company announced on Thursday (Nov 21).
The painful job cuts underscore the rapid decline of what had been one of America’s most celebrated start-ups which put a mammoth footprint in the commercial real estate of major cities around the globe but recently had to cancel its debut on Wall Street.
The lay-offs which began “weeks ago” were necessary “to create a more efficient organisation”, a WeWork spokesman said in a statement. The dismissed workers “will receive severance, continued benefits, and other forms of assistance to aid in their career transition”.
A WeWork spokesman contacted by The Straits Times declined to comment on whether there would be layoffs in Singapore or Asia, or if the company’s operations and planned expansion in the region would be affected.
WeWork is the leader among flexible work space operators in Singapore, which has seen such facilities triple since 2015. In October, it opened a new space in the Central Business District and said it would add two more, bringing its total to 12 locations in Singapore by the end of the year. It had then 25 locations across South-east Asia.
WeWork told shareholders earlier this month that it lost almost US$1.3 billion (S$1.7 billion) in the third quarter, more than twice the losses recorded in the same period a year earlier.
As investors and analysts questioned the company’s value, WeWork in September scrapped plans for an initial public offering, forced out chief executive Adam Neumann and took a bailout from Japan’s SoftBank Group, a major investor.
UNCONVENTIONAL EXECUTIVE
Mr Alex Cohen, a vice-president at the real estate firm Compass in New York, told AFP that WeWork’s payroll became bloated as it tried to keep services – space design, engineering and construction management – in-house rather than outsourcing them.
“WeWork’s ‘growth at all costs’ ethos meant they didn’t have time or appropriate management to put in place the processes and organisational structures to enable their staff to efficiently service the business’s relentless appetite for new locations,” he said in an e-mail.
Mr Neumann stepped down from WeWork’s board of directors with a US$1.7 billion exit package while the company’s value was slashed to US$8 billion – a far cry from its US$47 billion valuation at the start of this year and just a fraction of the sum envisioned as part of the failed IPO.
A source told AFP that Mr Neumann will get US$1 billion for his SoftBank shares, US$500 million for reimbursements of personal debts and US$185 million in consulting fees.
The unconventional entrepreneur had faced simmering questions over his management style, loose approach to corporate governance and allegations of self-dealing – not to mention a Wall Street Journal expose which laid out his drug and alcohol use and his aspiration to become the world’s first trillionaire.
A former employee, Ms Maria Bardhi, filed a labour grievance in New York accusing Mr Neumann of pregnancy discrimination, saying he referred to her maternity leave as “vacation” and “retirement”. The company also allegedly paid Ms Bardhi’s temporary replacement twice her salary and fired her six months after her return.
The WeWork debacle contributed to woes at SoftBank, which earlier this month announced its largest quarterly loss ever at US$6.4 billion.
Mr Masayoshi Son, SoftBank’s chief executive, expressed remorse and acknowledged having misjudged both ride-hailing giant Uber and WeWork.
“My investment decisions were in many ways poor. I regret them deeply,” he said.
With additional information from The Straits Times
