WeWork, which lost billions of dollars building and operating a global empire of co-working spaces, warned investors on Tuesday that it might not be in business for much longer.
“Substantial doubt exists about the company’s ability to continue as a going concern,” the company said in a financial filing.
The announcement did not come as a surprise. WeWork’s stock has been trading for pennies for months as investors concluded that the company’s financial obligations and losses had become overwhelming. The company went through a financial restructuring this year to buy more time for a turnaround effort, but soon after that, Sandeep Mathrani, the chief executive seen as the company’s savior, suddenly departed.
WeWork’s stock lost nearly a fourth of its value in trading after the announcement on Tuesday, which was issued after market hours along with the company’s quarterly earnings.
Four years ago, many in the real estate world and beyond believed that WeWork, under its charismatic chief executive, Adam Neumann, was destined for meteoric growth. They bet that individuals, small businesses and large companies would give up their traditional office space and choose instead to work from WeWork locations, which were sleekly designed and often served beer and kombucha to build a sense of community.
The company spent huge sums leasing and renovating hundreds of locations around the world, but it never took in enough customers to cover its rent bill. “This has never been a business model that worked,” Vicki Bryan, chief executive of Bond Angle, a research firm, said Tuesday.
WeWork has been on the brink before.
It nearly collapsed in 2019 after it failed to carry out an initial public offering. Then, it was bailed out by SoftBank, the Japanese conglomerate, which ended up becoming WeWork’s largest shareholder and a major creditor.
Like many other office space companies, WeWork was hit hard by the pandemic shift to working from home. But as people trickled back to the office, it believed it still had a future, and became a publicly traded company in 2021 by merging with a special purpose acquisition company.
Though WeWork’s occupancy rates improved and its losses shrunk, it was still burning through enormous amounts of cash. In the first half of this year, its operations consumed $530 million, almost as much as in the first half of 2022.
Since the end of 2017, WeWork has lost $15 billion. SoftBank has taken losses of more than $10 billion on its investments in the company.
If WeWork were to collapse and stop its lease payments, it could deepen the rout in the office space market and heap further pain on commercial landlords in cities like New York and San Francisco.
On Tuesday, David Tolley, the interim chief executive, pointed to some bright spots in WeWork’s business, like growth in revenue, but he listed the headwinds the company faced, including a surfeit of office space in the market and increased competition from other co-working companies.
To increase its chances of remaining viable, WeWork said it would need to reduce its lease costs and other expenses, increase revenue and seek “additional capital via issuance of debt or equity securities or asset sales.”
A WeWork spokeswoman declined to comment further.
