'WeWork' or 'WeCrashed': From $40 Billion to 'Going Concern'
$WeWork (WE.US)$, which was valued at $40 billion by $SoftBank Group (9984.JP)$ four years ago, is now warning of possible bankruptcy due to heavy debt and negative cash flows from operating activities. The Covid pandemic and subsequent economic slump have led to many businesses exiting their leases in favor of remote work, leaving WeWork struggling to generate cash and pay its debts.
If we are not successful in improving our liquidity position and the profitability of our operations, we may need to consider all strategic alternatives, including restructuring or refinancing our debt, seeking additional debt or equity capital, reducing or delaying our business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code," the company said.
WeWork's stock has been trading below $1 since mid-March. It tumbled over 23% to 16 cents in extended trading on Tuesday and now has a market cap below $500 million. The company had a net loss in the first half of the year of $700 million after losing $2.3 billion in 2022. As of June 30, it had $205 million in cash and equivalents and total liquidity of $680 million. It has $2.91 billion in long-term debt.
Key factors for whether WeWork can remain a going concern include limiting capital expenditures, increasing revenue and seeking capital through debt or equity issuance.
WeWork's CEO Sandeep Mathrani, who took over the troubled company in 2020 and recently led its financial restructuring, stepped down in May, leaving the company without a permanent successor. Analysts are questioning the viability of WeWork, which has spent billions of dollars building a business that has never come close to breaking even. Its stock is down more than 95% from October 2021 when it secured a stock market listing through a merger. The company's fate rests with SoftBank, which has invested nearly $12 billion in WeWork and is its largest shareholder. A collapse of WeWork could be a "systematic shock" to the weak commercial real estate sector in New York, San Francisco, and other cities.
Ratings agencies have a gloomy view of WeWork. In March 21, S&P downgraded WeWork's "issuer credit rating by three notches, to CC, after it reached a deal to cut its debt by roughly $1.5 billion and extend some maturities," noted the Journal.
Meanwhile, Fitch cited negative earnings before interest, taxes, depreciation and amortization, and free cash flow when downgrading WeWork's credit rating two notches to C. WeWork declined to comment, according to the Journal.
However, WeWork is optimistic about its strategy.
WeWork remains uniquely positioned to take advantage of this trend [of hybrid work] given its competitive solution and well-recognized brand name as a flex space operator," according to a WeWork spokesperson's email about S&P's latest report.
Source: Forbes, The New York Times, CNBC
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102326563 : So Sandeep was utterly useless. Deep shit
102945117 : CEO Sandeep basically too over and ruin We work...can he just leave a wrecked ship earlier than it's crew