Four years after its foray into the Chinese market, followed by rapid and hemorrhagic cash expansion, WeWork has decided to reduce its involvement in the country.
WeWork's The Chinese unit secured a $ 200 million investment led by Shanghai-based equity firm Trustbridge Partners, which first backed WeWork China in its Series B round in 2018, the American giant announced. co-working. What the release did not emphasize is that the latest funding effectively makes Trustbridge Partners the controlling shareholder, leaving WeWork with a minority stake in its Chinese entity.
The investment marks WeWork China transition from a subsidiary of a multinational to a Chinese-owned company - with a globally recognized brand, a kind of franchise.
WeWork China will continue its close collaboration with WeWork's global headquarters to "ensure WeWork brand consistency and the satisfaction of global members and employees," a spokesperson said in a statement to ProWellTech.
However, other changes are already underway. There have been layoffs as part of the sale and "a lot of things remain uncertain," the person familiar with the matter said. WeWork China declined to comment on the matter.
WeWork arrived in China at the height of the coworking boom in the country. Its branding, service, and chic design have long attracted well-funded startups and large, open-minded bodies. Since 2016, more than 100 WeWork spaces have sprung up in 12 cities in China, including dozens acquired by local rival Naked Hub. It now claims 65,000 members in the country.
It has also launched a number of initiatives in China, including an on-demand service for clients who don't want to commit to long-term leases, which could help generate more revenue.
Globally, WeWork serves 612,000 members in 843 offices in 38 countries. China accounts for about one eight of its locations, down from a share of one sixth in 2018.
WeWork China is not only competing with cheaper, home-grown alternatives - both private and government-subsidized - but it also has to deal with a weakening economy in times of COVID-19 and uncertain U.S.-China relations. Giving up operational control in a cash-burning market seems logical, given all the troubles it already faces at home.
Prior to its planned initial public offering, which was subsequently postponed, WeWork said that trade policy uncertainty could negatively impact its business. It also highlighted China, a low-priced market, as a drag on its profit margin.
Following the investment, Trustbridge Partners will launch a major localization revamp for WeWork China, from "decision making and management, product and business, to operations and productivity," said the WeWork representative in China. The new owner will also seek partnerships with local communities, real estate companies and Chinese businesses during the process.
WeWork China gets a new garment following the sale. Michael Jiang, annual operating partner of Trustbridge Partners, will serve as interim chief executive officer. Jiang previously served as senior vice president of Meituan, the Chinese giant of delivery and on-demand services.