WeWork Inc., the office-sharing company that faced a potential financial crisis in August, announced on Wednesday its intentions to renegotiate global leases as part of its efforts to reduce operating costs.
In order to achieve this, the company plans to exit “unfit and underperforming locations” while reinvesting in its strongest assets.
According to Chief Executive David Tolley, the current lease liabilities still remain excessively high and don’t align with current market conditions. In fact, they accounted for over two-thirds of total operating expenses in the second quarter. Therefore, WeWork is taking decisive action to address this issue.
Despite these challenges, WeWork reassures its commitment to its members by stating that it plans to remain in the majority of its buildings and will provide support to minimize any disruptions caused by the changes.
Tolley added, “WeWork is here to stay. We will continue to lead the global flex space industry and be a trusted real estate partner to our members.”
This announcement follows a turbulent period for the company. In an effort to meet the requirements of the New York Stock Exchange (NYSE), WeWork underwent a 1-for-40 reverse stock split on September 1, after its stock price dropped below the required minimum closing price of $1.
Back in August, the company expressed concerns about its solvency as it sought to address its unprofitable business model. WeWork’s survival now depends on successfully executing its plan to improve liquidity and profitability over the next 12 months.
WeWork was initially founded by Israeli entrepreneur Adam Neumann and achieved a peak valuation of $47 billion.
- WeWork is seeking to renegotiate global leases to reduce operating costs.
- The company plans to exit underperforming locations and focus on stronger assets.
- WeWork emphasizes its commitment to remain in the majority of its buildings and support its members.
- The company recently underwent a reverse stock split on the NYSE.
- WeWork acknowledged doubts about solvency and aims to improve liquidity and profitability.
- The office-sharing company was established by Adam Neumann and once valued at $47 billion.
WeWork: A History of Growth and Challenges
In 2010, WeWork was founded in Manhattan, offering office space for freelancers in the gig economy. Over the years, it rapidly expanded to 425 locations across 27 countries with funding from private investors, notably Japanese conglomerate SoftBank.
However, the company faced setbacks when its founder, Adam Neumann, failed to execute a successful initial public offering (IPO) in 2019. As a result, Neumann left the company with a billion-dollar package. This intriguing journey of WeWork, along with Neumann’s controversial character, was vividly portrayed in the Apple TV series “WeCrashed,” featuring Oscar winner Jared Leto as Neumann. It was also highlighted in a Hulu documentary called “WeWork: or The Making and Breaking of a $47 Billion Unicorn.”
Despite its initial promise, WeWork’s valuation drastically decreased to $9 billion by the time it merged with SPAC BowX Acquisition Corp.
In the second quarter, WeWork managed to narrow its loss to $397 million, or 21 cents a share, compared to $577 million, or 76 cents a share, in the same period last year. Revenue also saw a slight increase from $815 million to $844 million during this period.
However, the company fell short of analyst expectations. Its loss of 21 cents per share missed the estimated loss of 12 cents per share from FactSet analysts. Additionally, its revenue of $844 million fell short of the analyst view by $6.2 million.
In May, Tolley, who was previously a board member, assumed the role of CEO after Sandeep Mathrani stepped down unexpectedly in February 2020. Soon after, WeWork announced the resignation of Chief Financial Officer Andre Fernandez.
Currently, WeWork’s stock has experienced a significant decline of 98% over the past 12 months, with a 4.2% decrease at the time of writing. In contrast, the S&P 500 index has recorded a 14% gain.
Amidst its ongoing challenges, WeWork continues to navigate the competitive real estate market and adapt to changing circumstances.
- WeWork founder Adam Neumann discounts his NYC triplex to $32 million
- WeWork bonds crater as investors shift into sell mode on going-concern warning
- WeWork, Carl’s Jr., Unilever and Shell among companies slammed by Yale over operations in Russia