Global coworking group WeWork's chairman and chief executive Sandeep Mathrani is to step down on 26 May and become to lead New York private equity firm Sycamore Partners' real estate activity as a director.
The move comes as WeWork faces delisting from the New York Stock Exchange as its share price continues to trade at less than $1. It was down 7.46% at $0.35 on Tuesday. In its most recent results while losses continue to narrow, Mathrani said cashflow break-even would now be by the end of 2024, later than previous projections that it would be in early 2024.
In a statement, WeWork confirmed board member David Tolley will serve as interim chief executive officer. He will work alongside WeWork’s president and chief operating officer Anthony Yazbeck and lead independent director Daniel Hurwitz will now serve as chairman of the board and lead a special committee to search for a permanent CEO.
Mathrani joined in February 2020 when WeWork faced a battle to cut debt and shore up investor sentiment in a company battered both by a first failed attempt at a public listing, and in turn the pandemic.
He has repeatedly called for patience throughout his tenure as the business pursues a number of strategies, something he repeated in a recent letter to shareholders. He says the business model is being set up to eventually benefit from structural changes in how offices are occupied.
WeWork said Mathrani has led the company through a "historic transformation" in the face of a global pandemic and challenging macroeconomic environment that has seen it make significant progress in cutting costs, growing revenue across all business segments and establishing additional lines of revenue through new products including WeWork All Access and WeWork Workplace.
Since 2019, WeWork says it has eliminated over $2.3 billion of recurring costs by "optimising" the global real estate portfolio and streamlining operating expenses.
There has also been "sequential revenue growth to hit $849 million in Q1 2023 from $593 million in Q2 2021". A recent debt restructuring has removed $1.2 billion in debt while also improving liquidity with over $1 billion in new funding and new and rolled capital commitments.
Mathrani said in a statement: “It has been a privilege to lead WeWork during a notable transformation. Over the last three years we have restored the brand, grown revenue, right-sized the company, restructured our debt, and developed new product lines. I am grateful to have been able to lead such a resilient group of employees who through it all stepped up to meet and beat every challenge. I am firm in my belief that this is WeWork’s moment."
Tolley said: “I am tremendously excited to join WeWork’s management team as the company continues to grow and progress towards free cash flow. I am also grateful to Sandeep for his work and insight to ensure this transition is seamless for our members, employees, and other stakeholders. Since joining the Board earlier this year, I have been impressed with the dedication and passion that the WeWork team brings to advancing our mission of empowering tomorrow’s world of work."
Tolley has been a director of WeWork since early 2023. He most recently served as chief financial officer at Intelsat from 2019 to 2022. He has also served as chief financial officer of OneWeb and was a private equity partner at Blackstone from 2000 to 2011.
On 19 April, WeWork received a non-compliance notice from the New York Stock Exchange as its share price had refused to budge above $1 a share for 30 trading days. The notice raised the possibility of WeWork having to delist or conduct a reverse stock split as its shares have sunk 90% from a market value of $9 billion (£6.53 billion) since it listed in March 2021.
If the share price refuses to move past $1 after the change at the top today, the most likely alternative to "cure" its non-compliance is a reverse stock split led by majority shareholder Japan's SoftBank.
This is a reduction in the number of a company's outstanding shares in the market which automatically boosts the value of the stock, usually based on a predetermined ratio. For example, a 2:1 reverse stock split would mean that investors would receive 1 share for every 2 shares that they own.
On 2 May WeWork said it had written to shareholders requesting support for a reverse stock split but it has not said it will pursue this option. It confirmed to the New York Stock Exchange it planned to cure the deficiency within the six-month deadline.
Mathrani is a former chief executive officer of Brookfield Properties' retail group and vice chairman of Brookfield Properties. He has joined Sycamore as a director to strengthen the firm's real estate expertise. He will lead the real estate activity, "improving and optimising real estate often embedded within Sycamore's target companies", the company said in a statement.