Global flexible workspace provider WeWork’s Chief Executive Sandeep Mathrani is leaving for private equity firm Sycamore Partners at a time when the money-losing company, backed by Japan’s SoftBank, still seeks to turn a profit and is fighting to keep its stock listed.
Mathrani, who joined WeWork in February 2020 just weeks before the pandemic sent U.S. workers remote working and upended the office sector, will step down as WeWork chairman, CEO and a director effective May 26, the New York-based company said Tuesday in a statement. WeWork board member David Tolley has been named interim CEO and will work alongside WeWork President and Chief Operating Officer Anthony Yazbeck.
WeWork’s lead independent director, Daniel Hurwitz, will now serve as chairman of the board and lead a special committee to search for a permanent CEO, WeWork said. A WeWork spokesperson declined to comment beyond the statement.
WeWork's stock has lost a significant portion of its value, closing at 35 cents a share on Tuesday, since it went public in October 2021. The company has received a delisting notice from the New York Stock Exchange as its share price had refused to budge above $1 a share for 30 trading days. WeWork is asking shareholders to approve a reverse stock split, though it might not ultimately pursue this option.
Mathrani will become a director at New York-based Sycamore and oversee the private equity firm’s real estate activity, Sycamore said in a separate statement, adding “real estate will continue to be a significant source of value" given the current environment.
He was the second permanent WeWork chief executive to leave following Adam Neumann, who, after co-founding the company in 2010, was ousted in 2019 amid corporate governance concerns that led to a failed attempt to go public.
Turnaround Efforts
Mathrani, known as a turnaround specialist, previously also served as CEO of Brookfield Properties' retail group after he overhauled mall owner General Growth Properties before GGP’s sale to Brookfield. He also had served as president of retail for Vornado Realty Trust.
Mathrani "successfully steered the company through the depths of the pandemic, introduced new revenue streams, and helped put WeWork on a path to profitability," Alex Clavel, CEO of SoftBank Group International, said in the statement.
He led WeWork through what the company described as “a historic transformation,” which included closing underperforming locations and cutting over $2.3 billion of recurring costs since the fourth quarter of 2019.
WeWork, majority owned by SoftBank, recently also undertook a financial restructuring that reduced its debt by $1.2 billion, in a move that the firm has said would slash its annual cash-base interest expenses by about $90 million. Under his tenure, WeWork also has introduced all-access and on-demand memberships that give members access to locations around the world as part of a so-called asset-light strategy.
While WeWork kept its second-quarter forecast, Mathrani’s departure comes as WeWork still has yet to become profitable. Despite an improvement in occupancy and what Mathrani recently described as the U.S. market “finally turning a corner,” first-quarter occupancy slowed from the fourth-quarter rate, WeWork recently reported.
Meanwhile, the financial restructuring that cut its debt and extended most of its debt maturity to 2027 led to a recent S&P Global downgrade of its already junk bond rating as the credit-rating firm said the move is “tantamount to a default.”
WeWork recently also said it doesn’t expect free cash flow to break even until the second half of 2024, which is later than what some analysts had expected.