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WeWork goes bankrupt due to the impact of the novel coronavirus – The effect on SoftBank Group and the response of the Japanese corporation

The major American shared office company, WeWork, has filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. This filing was made in the backdrop of a significant decrease in office usage due to the spread of the new coronavirus in early 2020.

WeWork was once aiming for an IPO in 2019, and was given an astonishing valuation of $47 billion (about 5 trillion yen). However, it failed to go public due to the unorthodox management style of its founder and CEO, Adam Neumann, who was later ousted from the management team.

The impact of this bankruptcy extends to SoftBank Group, which made a large investment in WeWork, and to several venture capital firms. Particularly, the SoftBank Group has drawn much attention from the media due to significant losses related to its investment in WeWork.

On the other hand, WeWork’s Japanese corporation, ‘WeWork Japan’, has clarified that it is not subject to the bankruptcy filing and will continue its business locally. This event serves as an example to the world of the rapid increase and fall of startup valuations and the accompanying risk of investment losses. Companies and VCs investing in startups will likely learn many lessons from this situation.

IT

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