After a bankruptcy threat, WeWork shares, once worth $47 billion, are now near zero.
WeWork (WE.N) shares were nearly zero on Wednesday after the once-popular startup said it could go bankrupt. This was a shocking turn of events for a company once privately worth $47 billion.
The SoftBank-backed company has been in trouble since its plans to go public in 2019 fell apart. Investors were scared off by the company’s significant losses, problems with corporate governance, and the way founder-CEO Adam Neumann ran the business.
WeWork’s problems didn’t go away in the years that followed. It finally went public in 2021, but at a much lower price, and it has never made money. SoftBank, a Japanese giant, put tens of billions of dollars into the startup to keep it going, but the company still needs to gain money.
Steve Clayton, who is in charge of stock funds at Hargreaves Lansdown, said, “WeWork may have been the most hyped new company in recent years.”
Since its debut in October 2021 through a blank-check merger, WeWork’s shares have lost almost all their value. On Wednesday, they were selling at 13 cents, giving the company a value of about $260 million. CEO Sandeep Mathrani left in May, and three board members went this week.
WeWork said on Tuesday that the search for a new CEO has begun.
The way the company makes money is by getting long-term leases and short-term rentals. Over the years, it overgrew, but the global coronavirus outbreak made shared office space less attractive.
“On an analyst call on Wednesday, temporary CEO David Tolley said that fewer and fewer companies, from mature large-cap companies to startups, are willing to sign long-term leases for fixed spaces in one place.
SoftBank has put a lot of money into the company over the last few years, but the troubles keep coming back. The head of that company, Masayoshi Son, had personally backed Neumann, and he gave WeWork $10 billion in 2019 after the botched IPO to save the business.
SoftBank lost billions of dollars because of its stake in WeWork. Son later said that he was sorry he had helped the company. He said, “My judgement was bad in many ways, and I am thinking a lot about that.”
WeWork made a deal in March to save money by cutting its debt by about $1.5 billion and putting off some of its due dates.
WeWork’s net loss was $349 million in the second quarter, down from $577 million at the same time last year. However, the company still burned through $646 million in cash in the first half of the year. At the end of June, it had $205 million in the bank.
“Flexible workspaces have a future in the office ecosystem, but WeWork, in its current state, may not,” BTIG analysts wrote Wednesday when they downgraded the stock to “neutral.”
WeWork said it was going to make sure it had enough cash on hand by lowering rent and rental costs, keeping costs under control, and reducing the number of members who leave.
India, a part of the company, said that the bankruptcy warning would not harm that part.