WeWork is preparing to cut at least 4,000 people from its workforce as it tries to stabilize itself after the company’s breakneck growth racked up heavy losses and led it to the brink of collapse, two people with knowledge of the matter said.
The cuts are expected to be announced as early as this week and will take place across WeWork’s sprawling global operation. Under the plan, the company’s core business of subletting office space would lay off 2,000 to 2,500 employees, one of the people said. An additional 1,000 employees will leave as WeWork sells or closes down noncore businesses, like a private school in Manhattan that WeWork set up. Additionally, roughly 1,000 building maintenance employees will be transferred to an outside contractor. Together, these employees would represent around a third of the 12,500 people WeWork employed at the end of June.
But one of the people said the company could shed as many as 5,000 to 6,000 employees.
The staff reductions will be included in a five-year plan to overhaul WeWork that could be presented to employees as early as Tuesday, said the people, who spoke on the condition of anonymity to discuss the layoff plans.
The layoffs represent the human cost of a remarkable reversal in WeWork’s fortunes. Under its co-founder and former chief executive, Adam Neumann, the company piled billions of dollars into an erratic expansion that included adding huge office spaces in the world’s most expensive cities, offering discounts to lure tenants and buying other businesses. WeWork, which leases office space from landlords, refurbishes it and rents it out to its customers, shelved plans for an initial public offering in late September after investors were put off by the company’s losses and had questions about its corporate governance.
SoftBank, the Japanese conglomerate that is WeWork’s largest outside shareholder, last month announced a plan to bail out the company and is now trying to stabilize the business. But it is not clear how far the plan, which rests on selling billions of dollars of new WeWork bonds to investors, has progressed. The prices of the company’s existing bonds have tumbled in recent days, a sign that investors are worried about its prospects.
WeWork last week reported that it lost $1.25 billion in the three months that ended in September, more than twice as much as the company had lost in the same period a year earlier. A corporate presentation provided to investors revealed that WeWork opened nearly half of its locations in the 12 months that ended in September. Many of these locations are losing money and are likely to be depleting WeWork’s cash, which stood at $2 billion at the end of September.
Neumann, who agreed to cede control over WeWork after stepping down from the chief executive post in September, stands to receive an exit package worth around $1 billion. As part of that, he will receive a $185 million consulting fee for four years and can sell nearly $1 billion of his shares in the company to SoftBank. The soft landing for Neumann deepened anger among employees as the layoffs loomed.
During the recent tumult at the company, employees formed a group, the WeWorkers Coalition, that, among other things, is pressing for severance packages for departing employees that it considers equitable.
Starting Dec. 9, cleaning and facilities jobs at WeWork will be outsourced to JLL, a real estate services company, or one of its partners, according to an email sent to affected staff members last week that was reviewed by The New York Times. WeWork has assured employees that every member of its cleaning and facilities teams will keep their jobs and receive the same level of pay and comparable benefits. But employees who choose not to transfer will lose their jobs and receive no severance, according to a document provided to employees that was reviewed by The Times.
The changes have unnerved many employees, according to interviews with workers and Slack messages reviewed by The Times, stirring fears that some staff members will eventually lose benefits or be forced to work different schedules.
In the Slack messages, one WeWork facilities staff member said that hearing about the outsourcing was like being informed of a death in the family. Another employee said the decision showed that management was unconcerned about the workers’ welfare and was making decisions based on what would save the company the most money.