From a mammoth $47 billion valuation in 2019, the twin exits of its CEO and CFO in 2023, to being on the brink of bankruptcy with its shares dropping 90% to nearly $0, it's been a stunning reversal of fortune for co-space giant WeWork.
WeWork?shares crashed 38% to nearly zero (ending at $0.13) on the New York Stock Exchange on Wednesday after it warned that it could go?bankrupt. Its shares have fallen more than 90% this year to date.
The SoftBank-backed company has been in turmoil ever since its?plans to go public in 2019 imploded after investors recoiled at its hefty losses, corporate governance lapses, and the management style of then-founder-CEO Adam Neumann.
WeWork's woes did not go away in subsequent years. It finally managed to go public in 2021 at a much-reduced valuation, but it has never turned a profit.?Its major backer, Japanese conglomerate SoftBank, sunk tens of billions to prop up the startup, but the company has continued to lose money.
WeWork's market cap has?crashed?to about $274 million after witnessing a $47 billion valuation in 2019.
"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, selling assets, other strategic transactions, and/or other measures, including obtaining relief under the U.S. Bankruptcy Code," the company said, as per the CNBC report.
Also Read:?10 Big Companies That Bounced Back From The Brink Of?Bankruptcy
Many executives have departed WeWork recently, including?CEO Sandeep Mathrani and CFO?Andre Fernandez's exits?in May 2023 and three board members this week.
WeWork said this week that the search for a new CEO is on. The company's business model involves taking long-term leases and renting out spaces for short periods of time. It expanded rapidly over the years, but the global coronavirus pandemic made shared office space less appealing.
"Fewer and fewer companies from mature large-cap businesses to startups are willing to enter into long-term leases for geographically fixed spaces," WeWork's interim CEO David Tolley has said.
Earlier this year, in March, WeWork reached a deal to cut debt by about $1.5 billion and extend the date of some maturities to save cash, the report mentioned.
Cost cuts helped WeWork reported a smaller net loss of $349 million in the second quarter compared to $577 million a year ago, but it still burned through $646 million in cash?in the first six months of the year. It had $205 million in hand as of the end of June, as per a Reuters report. WeWork said it was planning to shore up liquidity by cutting rent and tenancy costs, controlling expenses, and reducing member churn.
Amidst the rising possibility of WeWork US going bankrupt, WeWork India clarified on Wednesday that its business will have no impact from the development in U.S.-based WeWork Global's bankruptcy warning, which has said "substantial doubt" exists about the company's ability to continue as a going concern, as per the BQ Prime report.
Reacting to WeWork Global's bankruptcy?warning,?WeWork India CEO Karan Virwani said in a statement, "Since inception, WeWork India has been backed by Embassy Group, which holds the majority stake and control to run and operate WeWork Global¡¯s business in India. Any development globally has no impact on our business here." Despite the challenges brought on by the pandemic, he said WeWork India emerged profitable early last year. "We ended FY223 with a revenue of Rs 1,400 crore and Rs 250 crore in earnings."??
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