Once valued at $47 billion, WeWork warns of "substantial doubt" that it can stay in business
Once worth as much as $47 billion, WeWork is now warning that there is "substantial doubt" about the company's ability to stay in business over the next year because of factors such as financial losses and a need for cash.
Shares of WeWork tumbled 2 cents, or 11%, to 19 cents in premarket trading as investors digested the announcement Tuesday by the office-sharing company that its future is contingent upon its improving liquidity and profitability over the next 12 months.
WeWork was once the biggest tenant in New York City, and made its name leasing, renovating and subleasing office space in cities nationwide. It eventually sold shares to the public in 2021, two years after a spectacular collapse during its first attempt to go public — which led to the ousting of its CEO and founder, Adam Neumann.
But the company has faced ongoing scrutiny of its finances.
"Substantial doubt exists about the Company's ability to continue as a going concern," WeWork said Tuesday. "The company's 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 company leases buildings and divides them into office spaces to sublet to its members, which include small businesses, startups and freelancers who want to avoid paying for permanent office space.
But over time its operating expenses soared and the company relied on repeated cash infusions from private investors. The company also said Tuesday it is facing high turnover rates by its members. It said it plans to negotiate more favorable lease terms, control spending and seek additional capital by issuing debt, stock or selling assets.
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WeWork's interim CEO, David Tolley, sounded an optimistic note Tuesday in the company's results for the second-quarter, during which it reported a loss of $349 million.
"The company's transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real estate portfolio optimization efforts, and maintaining a disciplined approach to reducing operating costs," Tolley said.