WeWork stock fell about 50 percent today as the business once valued at $47 billion reportedly plans to file for bankruptcy.

WeWork was founded in 2010 and provides coworking spaces in office buildings as an alternative to traditional offices and work-from-home arrangements. WeWork gained some high-profile customers like IBM and Microsoft but has consistently lost money. WeWork’s net losses have been getting smaller but are still substantial: A net loss of $2.3 billion in 2022 was followed by a loss of $696 million in the first six months of 2023.

“WeWork is planning to file for bankruptcy as early as next week,” The Wall Street Journal reported yesterday, citing people familiar with the matter.

As Business Insider wrote today, “WeWork reached a peak valuation of $47 billion back in January 2019, after netting $5 billion worth of direct investment from SoftBank. That was followed by a disastrous attempt to go public that eventually led to the exit of the company’s controversial founder, Adam Neumann.”

WeWork filed an IPO form in August 2019 but didn’t go public until October 2021, when it merged with a special purpose acquisition company in a deal that valued it at about $9 billion. WeWork’s market capitalization was about $120 million when the market closed yesterday and was down to about $60 million during trading today.

WeWork, based in New York, has been “struggling with a heavy debt load and hefty losses for a few years now,” Reuters wrote.

The latest trouble resulted in WeWork failing to make interest payments. “WeWork missed interest payments owed to its bondholders on Oct. 2, kicking off a 30-day grace period in which it needs to make the payments. Failing to do so would be considered an event of default. On Tuesday, the company said it has struck an agreement with the bondholders to allow it another seven days to negotiate with the stakeholders before a default is triggered,” the WSJ report said.

A WeWork regulatory filing yesterday said that “lease renegotiations and the active discussions with key certain stakeholders in the Company’s capital structure are still ongoing,” necessitating the seven-day extension. Reuters quoted CI Roosevelt Private Wealth Senior Portfolio Manager Jason Benowitz as saying, “Whether or not WeWork can reach a short-term accommodation with bondholders to stave off a near-term bankruptcy, it likely holds many long-term office leases that will need to be restructured or written off.”

WeWork recently said it may fold

WeWork warned in August that the company may not survive for long. Because of WeWork’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 an earnings announcement.

“Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships,” CEO David Tolley said.

WeWork said at the time that its “ability to continue as a going concern is contingent upon successful execution of management’s plan to improve liquidity and profitability over the next 12 months.” The plan includes “reducing rent and tenancy costs via restructuring actions and negotiation of more favorable lease terms; increasing revenue by reducing member churn and increasing new sales; controlling expenses and limiting capital expenditures; and seeking additional capital via issuance of debt or equity securities or asset sales.”

WeWork reported that it had 777 locations in 39 countries as of June 30, with “906,000 workstations and 653,000 physical memberships, equating to physical occupancy of 72 percent, and a decrease in physical memberships of 1 percent year-over-year.” It had $205 million of cash on hand.

“WeWork has an estimated $10 billion in lease obligations due starting from the second half of this year through the end of 2027 and an additional $15 billion starting in 2028, according to public filings,” the WSJ article said.

WeWork declined to comment to the WSJ on the bankruptcy report, telling the newspaper that it is “speculation.” WeWork told the paper that the seven-day extension “provides time to continue in the positive conversations with our key financial stakeholders and engage with them to implement our ongoing strategic efforts to enhance our capital structure.”

We contacted WeWork today and will update this article if we get a response.

https://arstechnica.com/?p=1980353