WeWork is planning to cut as many as 4,000 jobs as part of an aggressive turnaround plan put in place by Japan’s SoftBank after it took control of the co-working business this week.
According to people with direct knowledge of its plans, the job cuts will amount to just under 30% of WeWork’s global workforce of around 14,000 people. About 1,000 of the cuts will hit employees such as janitorial staff, which WeWork is looking to move to an outsourcing company.
WeWork is also looking to prioritize three markets — the U.S., Europe and Japan — and will pull back from other regions including China, India and much of Latin America. It already has 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 $9.5-billion SoftBank rescue plan that helped the company avoid bankruptcy and included terms that will hand up to $1.7 billion to Adam Neumann, the crisis-hit group’s co-founder.
The SoftBank-controlled company has set a goal of boosting occupancy rates in its most important markets to about 90%, the people said. That compares to an occupancy that had dipped below 80% as it pursued a business model more focused on global growth and expansion.
Marcelo Claure, the SoftBank executive who has been named executive chairman of the office space provider, addressed WeWork staff on Wednesday, telling them the company would have to “right-size” its business to reach profitability and that would include job cuts.
“Yes, there will be layoffs — 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.
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 said there was “a lot of anger” inside the company, with staff venting their frustrations about the sums Neumann stood to collect under the SoftBank deal, including a $185-million “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 $3-billion tender. The SoftBank offer values WeWork at about $8 billion, far below its recent funding rounds, including a SoftBank-led round that valued the company at $47 billion 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, but the thousands of people who joined in more recent years received stock at higher valuations.
© The Financial Times Ltd. 2019. All Rights Reserved. FT and Financial Times are trademarks of the Financial Times Ltd. Not to be redistributed, copied or modified in any way.