WeWork Was Once Valued at $47 Billion. Now, the Company Is Issuing a Stark Warning to Investors That It May Not Survive WeWork's Q2 earnings report said there is "substantial doubt" about the company's future to carry on operations amid financial distress.
By Madeline Garfinkle •
Key Takeaways
- WeWork expressed concern about the company's future in its second quarter earnings report.
- The company's stock value has plummeted by nearly 90% year to date, a stark reflection of its financial struggles.
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WeWork, the global co-working company, has issued a warning to investors about its potential inability to continue operating.
The company expressed "substantial doubt" regarding its status as a "going concern" in its Q2 earnings report released on Tuesday. The report stated concerns about the company's future viability due to losses, cash flow, and member losses — prompting the need for a plan to improve liquidity, profitability, and raise capital.
Once hailed for its charismatic founder Adam Neumann and predictions of exponential growth, WeWork was worth a staggering $47 billion at its peak in 2019, with 850 locations worldwide. Today, the company has 717 locations open or coming soon, according to the company's website.
WeWork's stock value is down by almost 90% year-to-date as of Wednesday morning.
A recent restructuring aimed to save the company by closing underperforming locations and reevaluating financials, but the sudden departure of CEO Sandeep Mathrani in June added to its challenges.
In 2019, a failed initial public offering nearly led to WeWork's collapse, but the company was salvaged by SoftBank, which shelled out a $1.5 billion investment in 2019 to be paid over the next year — in addition to $3 million in shares of other investors of WeWork. However, the company's fate was further hindered by Covid-19 as a global lockdown took hold, ultimately reporting $3.2 billion in losses over the course of the pandemic.
In another effort to save the company, in 2021, WeWork went public by merging with a special purpose acquisition company (a publicly traded entity formed to raise funds from investors and subsequently acquire or merge with a private company, facilitating its entry into the public market).
Related: WeWork Co-Founder Adam Neumann Wants to Be Your Landlord, Again
Despite some improvement in occupancy rates in 2022, WeWork has continued to face significant cash burn. The company has lost $15 billion since 2017, per The New York Times, with SoftBank incurring over $10 billion in losses from its investments.
In the new report, the company stated that its survival depends on effectively implementing a management plan over the next year, taking actions such as reducing rent costs, boosting revenue by minimizing member turnover and increasing sales, managing expenses, and pursuing additional capital through debt/equity offerings or asset sales.
"The company's transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real estate portfolio optimization efforts, and maintaining a disciplined approach to reducing operating costs," David Tolley, interim CEO, said in the report.
