WeWork shares nosedive 42% amid bankruptcy reports
WeWork shares took a nosedive of over 42% in after-hours trading following news from the Wall Street Journal (WSJ) indicating the company might file for bankruptcy next week. The flexible office space provider, once valued at $47 billion, is reportedly preparing a Chapter 11 petition in New Jersey. This development comes after WeWork failed to make interest payments to bondholders on October 2, triggering a 30-day grace period.
Restructuring efforts and renegotiating leases
According to the WSJ report, in August, WeWork revamped its board by adding directors experienced in financial restructuring. The company is currently working on renegotiating leases as part of its restructuring strategy. As of June, WeWork had 777 locations across the globe, with lease commitments amounting to roughly $10 billion through 2027 and an additional $15 billion from 2028 onwards. After burning through $530 million in this year's first half, the company had around $205 million in cash by June.
Challenges faced by WeWork
Over the years, WeWork has encountered several obstacles, with the demand for its co-working spaces consistently decreasing. The COVID-19 pandemic worsened these problems as businesses vacated office spaces and employees shifted to remote work. Even as some companies have returned to offices, the interest in WeWork spaces has not recovered to pre-pandemic levels. In August, WeWork reported a net loss of $397 million for Q2 on revenue of $877 million.
WeWork's journey and market cap decline
WeWork's co-founder Adam Neumann was forced out in 2019 due to concerns about his unconventional leadership style and related-party transactions with the company. In 2021, WeWork went public via a merger with a special-purpose acquisition company after scrapping its initial plans for a public offering. The company's stock reached a new 52-week low at just $1.21, resulting in a market cap of $121 million, a far cry from its $47 billion valuation in January 2019.
