WeWork Layoffs: Startup Cuts 500 More Tech Jobs In Cost-Cutting Efforts

WeWork is reportedly laying off as much as 500 employees, adding a new chapter this week to their corporate drama.

The news came after the company's scheduled IPO went up in flames on Sept. 30. The positions affected by the job cut include software engineers, product managers, and data scientists, according to The Information.

Of those 500 jobs, 350 would be slashed off from WeWork's main corporate division, and the 150 would come from companies that it acquired: Teem and SpaceIQ.

Earlier, it was estimated that about 2,000 employees or 16% of the WeWork's global employees would be sacked, but the exact figure is still in discussion.

This mass layoff comes amid WeWork's plan to drive down their costs.

WeWork's business model revolves around signing up for long term leases, generally 15 years, and subleasing it to SMEs and Enterprise members at shorter durations, Harvard Business School points out.

Mounting Debt
The company is already $47 billion deep in long term lease obligations, but the more pressing concern is their $2.3 billion in cash obligations due next year.

Fitch Ratings downgraded WeWork's credit rating from a junk B status to a CCC+, warning that a "default is a real possibility."

"The downgrade and outlook reflect WeWork's uncertain liquidity profile in the absence of its earlier plan to raise at least $3 billion in an IPO plus $4 billion in senior secured debt along with $2 billion in letter of credit capacity," Fitch said in the statement.

Financial Mess
Before the scrutiny, WeWork was valued at $47 billion, but upon review of their IPO filings, investors find that the numbers don't tie-up.

"Their whole approach is at best sloppy, because a lot of the important numbers don't tick and tie, and at worst it could be obfuscation," Nori Gerardo Lietz told The Wall Street Journal.

WeWork trimmed their expectations to $10 billion.

Kicked-out CEO
Adam Neumann, the co-founder and former CEO of WeWork was also forced to vacate his position on Sept. 24 due to rising concerns about corporate governance and the piling losses. Sebastian Gunningham and Artie Minson have replaced Neumann as co-CEOs.