WeWork, a US-based company that provides office spaces, was once valued at $47 billion by SoftBank.
However, in its second-quarter earnings report, WeWork has expressed doubts for the first time about its ability to sustain as a going concern.
The company’s future outlook is dependent on several plans, including restructuring and acquiring additional capital over the next 12 months.
David Tolley, who is currently serving as interim CEO, attributed the company’s underperformance in recent months to economic and property market conditions. He added that higher competition in flexible space and macroeconomic volatility resulted in a slight decline in memberships.
WeWork has been revamping its business model after co-founder Adam Neumann’s failed attempt to go public in 2019. The company has already exited or amended 590 leases, reducing future lease commitments by $12.7 billion. Tolley said that WeWork would “double down” on its real estate portfolio optimization efforts.
The company currently has a membership of 512,000 in 610 locations spread out across 33 countries. Unfortunately, the company experienced a 3% decline in membership, and occupancy in its buildings decreased from 73% to 72% from the previous year.
When excluding locations in China, Israel, and South Africa, where the company receives a management fee, WeWork’s revenues increased by 4% to $844mn in the second quarter, meeting the lower end of its previous guidance.
Although net losses were almost halved compared to $635mn a year ago, adjusted losses before interest, tax, depreciation, and amortization were far below the expected range. This news came after WeWork completed a financial restructuring that reduced its debt load by about $1.2bn.
WeWork’s shares had already decreased by 95% in the past year and fell another third in after-hours trading to 14 cents. Additionally, its 2025 bonds last traded at 34 cents on the dollar.
The company stated that continuing as a going concern would depend on a series of actions, including negotiating more favorable leases, controlling costs, and seeking fresh capital via the issuance of debt or stock, or asset sales. At the end of June, the company had $680mn of liquidity, including $205mn of cash.
WeWork Short (Sell)
Enter At: 0.2053
T.P_1: 0.1914
T.P_2: 0.1753
T.P_3: 0.1639
T.P_4: 0.1424
T.P_5: 0.1157
T.P_6: 0.0818
T.P_7: 0.0451
T.P_8: 0.0000
S.L: 0.3252
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