Wework: WeWork sends global’s bankruptcy warning: What went wrong

Coworking major WeWork India has sent distress signals. The co-working company now says there’s “substantial doubt” it will even be able to stay in business. “As disclosed in WeWork’s Quarterly Report for the three and six months ended June 30, 2023 (the “Second Quarter 10-Q”), as a result of the Company’s losses and projected cash needs, combined with increased member churn and current liquidity levels, substantial doubt exists about the Company’s ability to continue as a going concern,” the company said in a statement.

The company said more customers were leaving and fewer new members were signing up than it had anticipated. That churn was cutting into its occupancy rate, which dropped in the second quarter compared to the previous one.
WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey, who reportedly used the funds from the sale of their previous co-working startup, Green Desk.

Warning signs
The pandemic, which emptied office workplaces around the world, also crushed WeWork’s business. The company also had to abort its IPO in 2019 when it failed to attract investors. In October 2019, the company was forced to withdraw its IPO after investors balked at buying its shares. Banks also increasingly became more reluctant to lend it money. In February 2020, the company announced Sandeep Mathrani as CEO. Under Mathrani, WeWork went public in October 2021 through a merger with a special-purpose acquisition company. The company’s stock has been on a downward slide since then. Three months ago, after overseeing a financial restructuring, Mathrani abruptly announced his departure.
WeWork’s stock has plunged 98% since the company went public in October 2021, wiping out nearly $9 billion in market value. The stock was trading at 16 cents early Wednesday. Its bonds are also at deeply distressed levels. The company’s 7.875% unsecured notes due in 2025 last changed hands for 33.5 cents on the dollar, according to data from Trace.
Way ahead for WeWork
To avert disaster, WeWork said that it will focus over the next 12 months on reducing rental costs, negotiating more favorable leases, increasing revenue and raising capital. On Tuesday, WeWork said three of its independent board members are being replaced by four new board members. It’s continuing to search for a permanent CEO.