WeWork warns of ‘substantial doubt’ over future as going concern

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WeWork, the US workplace area firm SoftBank as soon as valued at $47bn, has warned for the primary time that it faces “substantial doubt” about its capacity to proceed as a going concern. 

In a second-quarter earnings report that fell wanting its steerage from three months in the past, WeWork mentioned its outlook relied on a sequence of plans together with additional restructuring and a seek for extra capital over the subsequent 12 months. 

David Tolley, who has served as interim chief government officer since Sandeep Mathrani stepped down as CEO in Might, blamed difficult financial and property market situations for a weaker than anticipated efficiency in latest months. 

“Extra provide in business actual property, rising competitors in versatile area and macroeconomic volatility drove larger member churn and softer demand than we anticipated, leading to a slight decline in memberships,” he mentioned. 

WeWork has been overhauling a cash-consuming enterprise mannequin since a failed try to go public in 2019, which precipitated the exit of co-founder Adam Neumann. It has exited or amended 590 leases, reducing about $12.7bn from future lease commitments. Tolley mentioned it could be “doubling down on our actual property portfolio optimisation efforts”.

The corporate now has 512,000 members in 610 areas in 33 international locations. Its memberships declined by 3 per cent yr over yr and occupancy in its buildings slipped from 73 per cent to 72 per cent.

On a consolidated foundation — which excludes areas in China, Israel and South Africa the place it receives a administration charge — WeWork’s revenues rose 4 per cent to $844mn within the second quarter, reaching the low finish of its earlier steerage.

Web losses virtually halved from $635mn a yr in the past, however a $36mn adjusted loss earlier than curiosity, tax, depreciation and amortisation was far beneath the vary it had informed traders to count on. 

Shares in WeWork, which ultimately went public in 2021 by merging with a blank-cheque firm, had been down 24 per cent to 16 cents in early buying and selling on Wednesday, leaving them down greater than 95 per cent over the previous yr. Its 2025 bonds final traded at 34 cents on the greenback.

The earnings miss comes simply three months after the corporate accomplished a monetary restructuring that reduce its debt load by about $1.2bn. On the finish of June it had $680mn of liquidity, it mentioned, together with $205mn of money.

Persevering with as a going concern would rely, it mentioned, on a sequence of actions, together with negotiating extra beneficial leases, controlling prices and looking for recent capital by way of the issuance of debt or inventory or asset gross sales.

Further reporting by Harriet Clarfelt in New York