WeWork says it has ‘substantial doubt’ about its ability to stay in business

Highlights-

• WeWork announced in its earnings report that there are doubts about its ability to continue operating as a going concern due to declining demand for its co-working spaces in the post-pandemic world.

• The company reported a net loss of $397 million for the second quarter, attributed to excess supply in commercial real estate, increasing competition, and macroeconomic volatility.

• WeWork outlined a plan to improve its liquidity and profitability, including cutting rent costs, increasing revenue by reducing member churn, controlling expenses, and seeking additional capital through debt or equity securities or asset sales.

WeWork, a global commercial real estate company that provides shared workspaces for technology startups, was once valued at $47 billion in its most recent private valuation. However, the company’s fortunes have taken a turn for the worse in recent years.

Its valuation has since fallen to $2.9 billion, according to its controlling shareholder, SoftBank.

The decline in valuation is due in part to the coronavirus pandemic, which has had a significant impact on the commercial real estate market.

WeWork has faced a number of challenges for years now, and with so many companies abandoning office space and more people being able to work remotely, demand for its co-working spaces has steadily declined over time.

The company has warned US regulators that it is worried about its survival and has issued a warning that its management needed to raise additional capital to keep the company afloat and maintain liquidity over the next 12 months.

WeWork Conference Room

Today, the 13-year-old company announced a net loss of $397 million for the second quarter on revenue of $877 million. While revenue was up 4% year-over-year, WeWork interim CEO David Tolley noted in a statement:

“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.”

These developments have raised questions about the future of WeWork and the viability of its business model. Once hailed as a disruptor in the commercial real estate industry, WeWork now faces an uncertain future as it struggles to adapt to changing market conditions and address concerns about its financial stability.

WeWork has raised over $22 billion in funding (including debt) from investors such as SoftBank, Insight Partners, BlackRock and Goldman Sachs, among others, according to Crunchbase.