JLL, IWG Were Reportedly In Talks With WeWork CEO Before His Abrupt Exit

WeWork’s recently departed CEO clashed with SoftBank Group, the company’s largest shareholder and lender, over management of the firm and its as-yet elusive path to a form of sustainability, The New York Times reports.

Before he left his role at the top of WeWork last month, Sandeep Mathrani was in talks with its biggest coworking rival, IWG, and commercial brokerage JLL to operate some of its spaces, the Times reported, citing unnamed sources. SoftBank, the Japanese conglomerate that has invested nearly $12B into WeWork, was reportedly not interested in the deal, and Mathrani left the company months later. 

His abrupt exit from WeWork on May 17 was announced less than two hours after the then-CEO met with investors and analysts. It sent WeWork’s struggling stock tumbling and left investor confidence at a new low.

"I was blown away. It was a total shock," Piper Sandler Managing Director Alexander Goldfarb told Bisnow at the time. "There was no telegraphing at all."

The Times reported that Mathrani’s frustration with SoftBank and a perceived lack of engagement from the lender — particularly over the firm's $3B debt restructuring — led to his departure.

Less than two weeks after Mathrani resigned, WeWork Chief Financial Officer Andre Fernandez also announced his exit after less than a year at the company. 

The executive exodus has left the already-struggling WeWork in a tenuous position, with its future largely tied to its SoftBank debt.

“We still believe that the current capital structure remains unsustainable,” Pranav Khattar, a primary credit analyst at S&P Global Ratings, told the Times.

WeWork’s stock has traded at less than a dollar since March, and the New York Stock Exchange in April gave the company six months to boost its stock price above $1 or face delisting. The company is looking to consolidate its shares through a process called a reverse stock split that would aim to push the stock price up.  

The stock was trading at 18 cents per share in early Monday trading, down more than 20% from last week and more than 98% since it went public in 2021.

In March, WeWork struck a deal with SoftBank and other investors to cut about $1.5B of its net debt and secure more than $1B of capital commitments. As part of the deal, SoftBank converted $1B of unsecured notes into equity. 

The company was also entertaining offers at the time from other investors with plans to stabilize the company. Adam Neumann, WeWork’s mercurial co-founder who was ousted after a failed IPO attempt in September 2019, told friends last fall that he was considering getting involved in WeWork again and buying back some of its stock, the Times reported. 

Neumann was scheduled to meet with Mathrani in October to discuss a large investment into WeWork and other strategic initiatives, reportedly considering an investment of up to $1B in the company. Mathrani reportedly canceled the meeting and did not reschedule it.

WeWork’s losses shrunk under Mathrani, but the company has been unable to sniff profitability despite years of guidance that it would soon stop losing money by now. It lost $299M in the first quarter of 2023, down from $435M during the same period of 2022 and a $2B loss in the first quarter of 2021. 

It has shed locations — down to 614 offices at the end of March compared to 715 at the end of 2020 — and has saved nearly $12B since 2019 by terminating or amending hundreds of leases. But a downturn in the U.S. office market has created new challenges for the company, as it competes with an increased availability for sublease space that is often cheaper than a WeWork subscription.

A collapse of the company would send shockwaves through the commercial real estate sector in New York, San Francisco and other cities that have struggled with office vacancy as the pandemic wanes, experts said. Stijn Van Nieuwerburgh, a Columbia Business School professor who specializes in real estate, told the Times that WeWork leases more office space in the U.S. than any other company. 

“It would pour more cold water on the office market, which is struggling direly,” Van Nieuwerburgh said.