WeWork says cancelled memberships and sustain losses making it difficult to do business
2 min read 09 Aug 2023, 07:03 AM ISTWeWork is struggling as customers cancel memberships and the company's stock falls 24% in extended trading.
PremiumOnce a successful American startup, WeWork is now struggling to keep the business going. The New York-based company is bleeding cash, and customers of its office rentals are canceling their memberships in droves, the company has claimed. The business of the co-working space firm is gradually crashing due to which the stock fell about 24% in extended trading on Tuesday.
WeWork's rise
In 2010, Adam Neumann started WeWork with the designer Miguel McKelvey. Their vision was to lease office space and then rent smaller parcels of it to customers. The American startup expanded slowly, then quickly, then at blinding speeds, fueled by a zero-interest-rate financial environment. Venture capitalists dumped truckloads of money into WeWork. The startup became one of the biggest private occupiers of office space in Manhattan by 2019, valued at $47 billion.
WeWork's fall
Achieveing the pinnacle, Neumann tried to take the company public in 2019, but the attempt at an initial public offering crashed when investors collectively woke up to the company’s extravagant spending and Neumann’s power-hungry eccentricities. It was found that Neumann was leasing space to the company in buildings he owned and charged his own business $5.9 million for a trademark on the name “We" that he owned.
Neumann was ousted in late 2019. He was replaced with Sandeep Mathrani- an industry veteran boasting a reputation for saving troubled real estate companies. Mathrani took over in February 2020, promising to stanch the financial bleeding and restore order. However, upon his arrival, his ambition got hampered due to the Covid-19 pandemic, the deadly virus that sent people into prolonged lockdown. Overnight, the idea of setting foot in a WeWork became outlandish, even terrifying, and occupancy dropped to 46% at its nadir.
WeWork seemed to achieve a milestone in March when it struck a deal with some of its biggest creditors and SoftBank to cut its debt load by around $1.5 billion and extend other maturities. But then in May, after three years on the job, Mathrani suddenly stepped down for a job at Sycamore Partners.
Yesterday, WeWork said three of its independent board members are being replaced by four new board members. It’s continuing to search for a permanent CEO. The company said that it will focus over the next 12 months on reducing rental costs, negotiating more favorable leases, increasing revenue, and raising capital.
WeWork stock
WeWork’s stock is down 85% this year, trading at 19 cents. Its bonds are at deeply distressed levels. The company’s 7.875% unsecured notes due in 2025 last changed hands for 33.5 cents on the dollar, Bloomberg said, citing data from Trace.
(With Bloomberg inputs)
