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Following a rough coronavirus pandemic and bouts with an embattled CEO, coworking space giant WeWork may be coming to the end of its days, the company suggested in a financial filing.
“Substantial doubt exists about the company’s ability to continue as a going concern,” the filing reads.
WeWork’s decline has been a long time coming, so the statement was not exactly news. The company’s stock has been trading at rock bottom for months, with investors having determined that WeWork’s financial obligations and losses may be too much to overcome.
This year, WeWork underwent a financial restructuring to help gain time for a turnaround, but CEO Sandeep Mathrani, who had been viewed as one of the company’s last hopes, suddenly left.
The company’s stock lost nearly one-fourth of its value after market hours on Tuesday when the announcement was made in conjunction with its quarterly earnings. By about midday on Wednesday, it was trading at $0.14 per share.
When WeWork was still making its upward climb, many both inside and outside of the real estate industry believed the company helmed under CEO Adam Neumann was the future of the workplace. Many predicted that individuals and businesses would choose to occupy WeWork’s locations instead of working from a traditional office building, favoring the company’s sleek designs, communal spaces and perks, such as beer and kombucha to build community.
However, as WeWork continued to pour more money into leasing and renovating hundreds of locations globally, less and less money came into the company, and WeWork was never able to make up for its expenses.
“This has never been a business model that worked,” Vicki Bryan, chief executive of research firm Bond Angle, said on Tuesday.
But WeWork’s woes undoubtedly predate the pandemic era as well. In 2019, the company was on the verge of collapse following its failure to deliver an initial public offering. Then Japanese conglomerate SoftBank swooped in to bail WeWork out and became the company’s largest shareholder and a major creditor.
But after the worst of the pandemic, the company still thought it had a chance and went on to become a publicly traded company by merging with a SPAC.
The company’s occupancy rates have indeed improved and its losses declined in recent years, but its outsized spending cannot be ignored. During the first half of 2023, operations totaled $530 million, which is nearly equal to how much it spent on operations in the first half of 2022.
WeWork has lost $15 billion since the end of 2017, and SoftBank has taken on losses of more than $10 billion as a result of its investment in the company.
At this point, WeWork’s potential collapse could also have a palpable impact on the greater commercial real estate market. If the company stops its lease payments, it could cause damage to an already hurting office space market, particularly in hubs like New York and San Francisco.
In the company’s earnings report, interim CEO David Tolley pointed to growth in revenue as a high point but also acknowledged that the excess of office space in the market at large and competition from other coworking companies pose challenges for WeWork’s viability.
In order to survive, the company said it would need to reduce lease costs and other expenses, increase revenue and find a source of additional capital through debt or equity securities or asset sales.
