WeWork, a company that provides office and coworking spaces, has issued a warning about the possibility of bankruptcy. The company's financial troubles have been building over the past few years, but the current situation is surprising considering the widespread presence of WeWork buildings around the world. The combination of the Covid-19 pandemic, which led to many businesses abandoning their leases in favor of remote work, and the subsequent economic downturn, has left WeWork burdened with debt and struggling to generate cash.
In a filing with the SEC, WeWork stated that its losses and negative cash flows raise doubts about its ability to continue operating. The company acknowledged that it may need to explore various strategic alternatives, including debt restructuring, seeking additional capital, or even filing for bankruptcy. WeWork's stock price has plummeted, trading below $1 and resulting in a market cap below $500 million.
The company reported a net loss of $700 million in the first half of the year, following a loss of $2.3 billion in 2022. As of June 30, WeWork had $205 million in cash and equivalents and total liquidity of $680 million. However, it also carries $2.91 billion in long-term debt.
WeWork's journey to this point has been tumultuous. The company initially planned to go public in 2019 but faced criticism for excessive spending and risks, as well as concerns about its founder's role in the company. SoftBank, a major investor in WeWork, took control of the business in a $5 billion financing package, leading to the resignation of founder Adam Neumann. WeWork eventually went public in 2021 through a merger with a special purpose acquisition company, but revenue growth has remained sluggish.
To ensure its survival, WeWork will need to limit capital expenditures, increase revenue, and seek capital through debt or equity issuance. The company is also facing internal challenges, as three board members recently resigned due to disagreements about governance and strategic direction. WeWork is currently searching for a permanent CEO.
The rise and fall of WeWork have been chronicled in the miniseries "WeCrashed," and the company's current financial predicament underscores the challenges it faces in the competitive office space market.