Adam Neumann wants to regain control of WeWork. Here's why your office is still open despite the bankruptcy filing.

• WeWork filed for Chapter 11 bankruptcy protection in November.
• Now cofounder Adam Neumann is exploring an offer to buy back the company.
• WeWork will have to renegotiate leases, and has already requested to end some.

WeWork, the company synonymous with coworking that was once valued at $47 billion, filed for Chapter 11 bankruptcy last November.

It now looks like cofounder Adam Neumann is trying to buy it back, according to a letter published by The New York Times' DealBook on Wednesday.

Neumann's lawyers said his new real-estate company, Flow Global, is partnering with capital providers including Dan Loeb's Third Point — and has met with WeWork several times to discuss buying it or providing it with financing.

The letter says that includes a formal proposal for a $200 million debtor-in-possession agreement.

Here's where it all went wrong for WeWork, and what the bankruptcy could mean for tenants and the commercial real estate sector.

What happened to WeWork?

The cracks first began to show when WeWork was preparing for its IPO in 2019.

Neumann stepped down as CEO after his eccentric management style came under fire. And concerns were raised about whether WeWork could ever become profitable.

WeWork's IPO was delayed, executives resigned, and its valuation was slashed to $10 billion. It eventually listed in 2021.

The company's strategy has been to take on leases at office buildings and sublet them as smaller coworking spaces.

Tim Hynes, global head of credit research at Debtwire, told Business Insider: "Some people at that time didn't even believe the model would work then, but then COVID happened, so that demand for subleasing dried up."

Last August, the company reported a net loss for the second quarter of $397 million — which was at least an improvement on the $635 million loss for the same period in 2022.

The following month WeWork said it would renegotiate nearly all of its leases. CEO David Tolley said its lease liabilities were too high, and were "dramatically out of step with current market conditions."

But it looks like those attempts weren't enough, so the company will be restructured under Chapter 11 proceedings.

What will happen to WeWork offices?

The main thing to note about WeWork's bankruptcy filing is it's Chapter 11, rather than Chapter 7 which would involve liquidation.

Chapter 11 allows a company to stay in business and restructure its assets.

"They need to raise capital, and they need to rightsize their real estate portfolio — negotiating more favorable lease terms, rejecting lease terms," said Sarah Foss, global head of legal at Debtwire. "These are often two drivers for a Chapter 11 filing."

This means that WeWork won't shut all its offices, and decisions are likely to be made case by case. It will depend on how profitable each lease is, and what renegotiating terms WeWork is offered by landlords.

In its bankruptcy announcement, WeWork said it "has a deliberate and value maximizing lease rejection plan that is expected to position the company for operational and financial success."

It added that the leases it's requesting the ability to reject as part of the filing are "largely non-operational."

Foss said that this also gives WeWork leverage to negotiate more favorable leases.

And because WeWork is a global company, with offices in 37 countries as of June, Foss said she'd expect to see ancillary filings in other jurisdictions along with the case in the US.

What happens to WeWork tenants and employees?

It remains to be seen how many of its offices WeWork chooses to keep leasing. But tenants can expect the company to contact them if a lease is rejected.

WeWork said that for the leases it has already requested the ability to reject, "all affected members have received advanced notice."

"They're going to probably just close the ones that are near-vacant," said Hynes. "But it's it's definitely possible, there's a risk that you get a notice that 'we couldn't reach a deal with the landlord,' and you're done."

WeWork employees, on the other hand, have less to worry about.

"Once you file for bankruptcy, the court has oversight of every last thing that you do. And one of the first things that they're going to do is seek authority to pay their employees," Foss told BI.

"Just like paying your light bills, electricity, you want to make sure that your employees are paid. So what's going to happen is they'll on day one seek to pay those employees."

And for anyone hoping to get their hands on any WeWork furniture for cheap — as one viral X post joked about — don't get your hopes up. "That's more of what you see in a liquidation," said Foss.

How will WeWork's bankruptcy affect the commercial real estate sector?

The commercial real estate industry has been suffering since the pandemic and the rise of remote work.

According to Colliers, office vacancy rates in Manhattan in the first quarter of 2023 matched record highs at 17.4%.

So if WeWork ends a lot of leases, it will only make the problem worse as more office space will become vacant.

"There are going to be some leases that just go dark, and then some they're going to try to work out, but it's in everybody's best interest to try to work something out so those buildings aren't vacant," Hynes told BI.

"The last thing you want is half your building vacant, then it's harder to release it. So you're better off almost leasing it at a loss just to keep people in there," he added. "Everybody's incentivized to get something worked out here — not a wholesale rejection of leases."

What could the future of WeWork look like?

"More than likely the company will survive under a smaller footprint, or could possibly merge with a competitor," said Hynes.

With so many people involved, from tenants to employees, it's unlikely that WeWork will disappear.

Even if it merges, it's likely the WeWork brand will remain because of its strong associations with subletting and office space.

Hynes also said there's a 99% chance that SoftBank gives WeWork more money to release the investor from any legal claims related to the bankruptcy.

"There's probably going to be a lot of litigation happening as a result of this as well," said Foss. "Anytime you talk about just, the high value and coming down, there's probably going to be a lot of litigation."

The letter sent by Neumann's lawyers accused WeWork of a "lack of engagement even to provide information to my clients in what is intended to be a value-maximizing transaction for all stakeholders."

It added that Neumann and his partners "stand ready to submit a detailed proposal to purchase the company or its assets."

A WeWork representative said in a statement: "WeWork is an extraordinary company. As such, we receive expressions of interest from external parties on a regular basis. We and our advisors always review those approaches with a view to acting in the best interests of the company.

"We continue to believe that the work we are currently doing — addressing our unsustainable rent expenses and restructuring our business — will ensure WeWork is best positioned as an independent, valuable, financially strong and sustainable company long into the future."