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After all the challenges WeWork has faced, the news about its going bankrupt does not seem surprising. The company did not comment on the announcement yet.
New York-based provider of coworking spaces WeWork Inc (NYSE: WE) is reportedly planning to file for bankruptcy next week as a result of the financial challenges it can not overcome. The company had a long-term debt of as much as $2.9 billion as of the end of June, with more than $13 billion tied up in long-term leases.
Following the news, WeWork stock dropped by 46.49% to close the session at $1.22 yesterday, which is a record low. In the after-hours trade, WE shares further plunged. As of the press moment, the stock is standing at $1.24. The company whose value once totalled $47 billion has a market cap of $121.42 million only.
WeWork’s Challenges
WeWork has been struggling since 2019 when its plans to launch an initial public offering (IPO) didn’t work because of doubts among investors about the company’s business model which involved securing extended leases and subletting on a short-term basis. Following the failure, WeWork CEO and cofounder Adam Neumann stepped down from his role in September 2019. Next month, WeWork’s biggest investor SoftBank Group Corp (TYO: 9984) took over the company. It invested as much as $18.5 billion in WeWork, but after the takeover, the latter’s valuation dropped to $5 billion. Notably, at that time, SoftBank also had to deal with the US Securities and Exchange Commission (SEC) which was scrutinizing WeWork over its disclosures to investors in the run-up to its failed IPO.
With the change of leadership, the company cut down its spending to a more manageable amount. New management sought after streams of revenue that made sense with their overall business model. They added business solutions to help companies with resources and payroll. In November 2019, WeWork also laid off as many as 2,400 employees. Besides, WeWork sold off businesses including Flatiron School, Teem, and its share of The Wing.
In 2020, the pandemic hit the world. However, it did not kill WeWork as many expected. The company made a number of critical changes that helped it hold on while facing a pandemic that kept people home and away from offices. In the first half of 2020, it managed to generate $1.1 billion in revenue.
In October 2021, WeWork finally went public through a special purpose acquisition company (SPAC) after more than two years of struggling with an IPO. The debut provided WeWork with gross cash proceeds of approximately $1.3 billion and valued the company at around $9 billion.
The IPO was not as profitable as expected, and SoftBank’s contributions to WeWork’s future did not pay off as expected. In 2022, WeWork reported a loss of nearly $2.3 billion. In November 2022, WeWork revealed its plans to close 40 underperforming shared office locations in the US that totaled about 41,000 workstations.
In August this year, WeWork warned of possible bankruptcy. The company explained:
“Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern.”
After all the challenges WeWork has faced, the news about its going bankrupt does not seem surprising. The company did not comment on the announcement yet.
The CEO of WeWork believes that the company’s Q4 2022 performance is a testament to employee efforts and product value.
Commercial real estate facilitator WeWork Inc (NYSE: WE) recently reported its Q4 and fiscal year 2022 results. For the period ended December 31st, the leading global flexible space provider reported revenue of $848 million. This income haul represents an increase of 18% from the year before as WeWork maximized cost-cutting efforts. For the fourth quarter, the New York-based company also realized revenue, using its budgeted foreign exchange rates, of $905 million. This figure came in 26% higher year-over-year (YoY) than WeWork’s previous revenue guidance of $870-890 million.
Commenting on the WeWork Q4 2022 outing, the company’s chairman and chief executive officer Sandeep Mathrani said:
“Our fourth quarter results demonstrate that we accomplished what we set out to do in fiscal year 2022 by staying focused on reducing expenses, optimizing our portfolio, growing revenue, and increasing occupancy. As a result, we crossed a historic milestone of achieving Adjusted EBITDA profitability in December – a testament to the hard work of our employees and the enduring value of our products.”
Furthermore, Mathrani also added, “As we move forward, we remain committed to building on this momentum while also enhancing our balance sheet.”
Other WeWork Q4 2022 Details
WeWork reported that physical memberships grew 17% YoY on a consolidated basis. Meanwhile, consolidated physical occupancy increased to 75% at the end of the last three months of last year. The company also identified a 56% YoY surge in All Access and On-Demand consolidated memberships for the fourth quarter. Memberships in the previously mentioned category currently sit at roughly 70,000 for the quarter.
In February, WeWork extended the maturity of its LC Facility’s Junior Tranche to March 2025 from November 2023. In addition, the physical and virtual coworking space provider also increased the facility from $350 million to $470 million.
WeWork’s net loss for the fourth quarter came in at $527 million, with the company also sustaining non-cash related expenses of $348 million inclusive. The latest quarterly report also gave Adjusted EBITDA as negative $26 million, marking a 75% improvement quarter-over-quarter. Nonetheless, the 75% quarterly improvement translates to a $257 million yearly improvement.
In addition to earning a systemwide revenue of $973 million in the fourth quarter, WeWork’s systemwide real estate portfolio also proved expansive. For instance, real estate portfolio as of December 31st last year comprised 779 locations in 39 countries. This portfolio supported roughly 906,000 workstations and 682,000 physical memberships, a 75% physical occupancy.
Meanwhile, WeWork’s consolidated real estate portfolio, as of December 31st, 2022, comprised 622 locations in 34 countries. In addition, this base supported nearly 731,000 workstations and 547,000 physical memberships, which also translates to a 75% physical occupancy.
WeWork’s systemwide physical membership increase was 16% YoY for the quarter, while its consolidated physical membership increased 17% YoY. Furthermore, the company has projected a Q1 2023 revenue outlook of between $830 million and $855 million.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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