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WeWork plans to axe 4,000 staff

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Via Financial Times

WeWork is planning to cut as many as 4,000 jobs as part of an aggressive turnround plan put in place by Japan’s SoftBank after it took control of the co-working business this week.

The job cuts will amount to just under 30 per cent of WeWork’s global workforce of around 14,000 people, according to people with direct knowledge of its plans. About 1,000 of the cuts will hit employees such as cleaners, which WeWork is looking to move to an outsourcing company.

WeWork is also looking to prioritise three markets — the US, Europe and Japan — and will pull back from other regions including China, India and much of Latin America. It has already begun looking at building closures in parts of its portfolio including in China and other regions.

The news comes as WeWork employees and investors digested a $9.5bn SoftBank rescue plan that helped the company avoid bankruptcy and included terms that will hand up to $1.7bn to Adam Neumann, the crisis-hit group’s cofounder.

The SoftBank-controlled company has set a goal of boosting occupancy rates in its most important markets to about 90 per cent, the people said, compared with an occupancy that had dipped below 80 per cent as it pursued a business model more focused on global expansion.

Marcelo Claure, the SoftBank executive who has been named executive chairman of the office space provider, told WeWork staff on Wednesday that the company would have to “right-size” its business to reach profitability and that would include job cuts.

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“Yes, there will be lay-offs — I don’t know how many — and yes, we have to right-size the business to achieve positive free cash flow and profitability,” he wrote in a memo seen by the Financial Times.

Mr Claure added: “But I will promise you that those that leave us will be treated with respect, dignity and fairness. And for those that stay, we will ensure everyone is aligned and shares in future value creation.”

WeWork declined to comment.

One former employee told the FT that there was “a lot of anger” inside the company, with staff venting their frustrations about the sums Mr Neumann stood to collect under the SoftBank deal, including a $185m “consulting fee”.

Many disgruntled WeWork employees hold shares in the company that were issued to them at a value above the $19.19 a share at which SoftBank is offering to buy them in a $3bn tender. The SoftBank offer values WeWork at about $8bn, far below its recent funding rounds including a SoftBank-led round that valued the company at $47bn this year.

One person who joined WeWork more than three years ago said he received a grant of stock at the time that was priced at $20 a share, while the thousands of people who joined in more recent years received stock at higher valuations.

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