WeWork has raised “substantial doubt” about its ability to stay in business.
The US flexible office group, once valued at $47bn, said in a 10-Q filing yesterday that its ability to continue as a going concern rested on its ability to boost liquidity and profit over the coming year.
The filing said: “As a result of our losses and our projected cash needs, which have been impacted by the recent increases in member churn, combined with our current liquidity level, substantial doubt exists about the company’s ability to continue as a going concern.”
David Tolley, who took over as interim chief executive after Sandeep Mathrani stepped down in May, blamed “excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility” for the weaker than expected performance.
WeWork’s revenue rose by 4% to $844m in the second quarter, reaching the low end of its previous guidance.
The group said it had incurred net losses of $700m for the six months to the end of June, in addition to the $2.3bn loss for 2022, $4.6bn loss in 2021, and $3.8bn loss in 2020. Negative cash flow from operating activities was $500m for H1.
It also reported a $351m loss from operations in the second quarter, and a $397m net loss. While the net losses were almost half the $635m of a year ago, its $36m adjusted loss was worse it had told investors to expect.
Long-term lease obligations have fallen over the quarter, but still amount to $13.3bn, down from $15.6bn six months ago. Long term net debt has fallen slightly from $3.2bn to $2.9bn. However, total expenses have actually risen over the period, from $1.13bn to $1.19bn.
WeWork’s shares dropped by a third to 14 cents during out-of-hours trading in New York. Shares have already fallen by 95% in the past year.
WeWork said its ability to continue as a going concern rested on the “successful execution” of a plan to dramatically cut rent and tenancy costs over the next 12 months, while further limiting spending and seeking additional capital.
The flex space provider today announced the addition of a clutch of high-profile finance appointments to its board of directors.
They include Paul Aronzon, founder of PSA Consulting; Paul Keglevic, former CEO, CFO and CRO of Energy Future Holdings; Elizabeth LaPuma, former managing director and head of balance sheet advisory at UBS; and Henry Miller, co-founder and retired partner of Marblegate Asset Management.
Tolley said: “The deep financial expertise and robust business experience [of the new directors] will add immense value as we double down on sustainably reducing costs, continuing to grow memberships and revenue, and strengthening our balance sheet.”
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