The co-working spaces rental company cracked a debt restructuring deal in March
Co-working space company WeWork has been on the brink of illiquidity for a few years. The pandemic did it no favors, and despite a return to normalcy, the company hasn’t quite been able to pull its business out of the doldrums. Now, it warns that it may not be able to go on at all.
“Substantial doubt exists about the company’s ability to continue as a going concern,” WeWork noted in a regulatory filing yesterday (Aug. 8), when it posted second quarter earnings results.
The company, which former CEO Adam Neumann co-founded in 2010 to disrupt a rigid office real estate market with flexibility, made the announcement five months after it cracked a debt restructuring deal to extend its lifeline.
In recent years, losses have ballooned and cash crunch worsened as companies ditched office spaces and workers took up the option to work remotely. The emergence of a hybrid work model has delivered a boost to office rental space IWG, which counts the likes of Microsoft $MSFT, Disney $DIS, and HSBC among as its clients. WeWork is hopeful that it’ll find takers again and, according to interim chief executive officer David Tolley, it’s focusing on retaining and growing its membership base, while reducing costs.
[W]e think now is the perfect market for a company like WeWork, given our scale, given our size, and given that the market is really moving our way. I think it’s not only a short-term scramble for space, with WeWork, I think there’s a structural shift going on, and we’re very well-positioned for it. —WeWork chief financial officer Ben Samuels to Yahoo! Finance on June 8
Over the next 12 months, the management’s game plan to avert a total shutdown includes:
🏢 Reducing rent and tenancy expense by taking additional restructuring actions and negotiating more favorable lease terms;
🛒 Increasing revenue by reducing member churn and increasing new sales, not just in terms of occupancy of physical spaces but also for its workplace management software;
💸 Controlling expenses and limiting capital expenditures;
🤑 Seeking additional capital through the issuance of debt or equity securities, or the sale of assets.
$47 billion: WeWork’s private valuation at its peak in early 2019, before it sought to go public.
$9 billion: The valuation at which WeWork went public in October 2021 at via a SPAC (special purpose acquisition company) merger
Below $1 billion: WeWork’s valuation earlier this year
At least $17 billion: How much Japanese investing giant Softbank and its Vision Fund have pumped into WeWork
300: Employee positions WeWork decided to cut globally in January, amounting to 7% of the workforce
$287 million: Cash WeWork had at the end of last year, down from $924 million at the end of 2021
24%: How much WeWork’s shares fell by in extended trading in New York yesterday (Aug. 8)
In 2020, after a failed IPO attempt, Sandeep Mathrani was appointed WeWork CEO with the task of turning things around at the struggling company. Three years later, this May, he stepped down. His exit shook investor confidence. Adding to the leadership shake up, another top exec—chief financial officer Andre Fernandez—resigned less than a week later.
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