WeWork, the once high-flying flexible workspace provider, is on the brink of filing for bankruptcy, sending shockwaves through the financial world. WeWork shares, listed as WE.N, took a nosedive of nearly 50%, reaching a record low on Wednesday in the wake of media reports suggesting that the company could file for bankruptcy as early as next week.
The New York-based company, which was once privately valued at an impressive $47 billion, is now staggering under the weight of heavy debt and substantial losses that have persisted for several years. Its market capitalization has plummeted to a mere $121 million, underscoring the company’s fall from grace.
This potential bankruptcy filing represents the culmination of a series of setbacks for WeWork, which was previously backed by SoftBank. Its initial plans for an IPO in 2019 unraveled amid skepticism surrounding its business model, characterized by long-term leases and short-term rentals. WeWork eventually went public in 2021, but at a significantly reduced valuation compared to its initial expectations, and it has never turned a profit.
WeWork is reportedly contemplating a Chapter 11 bankruptcy filing in New Jersey, as first reported by the Wall Street Journal on Tuesday. In a puzzling move, the company chose to withhold an interest payment due on November 1 for senior notes due in 2025, despite having the necessary funds to make the payment. WeWork had previously issued a bankruptcy warning in August, adding to the sense of impending financial crisis.
Need for Restructure
Jason Benowitz, a senior portfolio manager at CI Roosevelt Private Wealth in New York, offered insights into the situation, saying, “Whether or not WeWork can reach a short-term accommodation with bondholders to stave off a near-term bankruptcy, it likely holds many long-term office leases that will need to be restructured or written off.” The repercussions of WeWork’s financial turmoil may extend to major urban office markets where the company is a significant tenant, potentially further weighing down industry fundamentals.
The dismal state of affairs is evident in WeWork’s stock price, which has hit an all-time low of $1.18, marking yet another record low. The stock has lost a staggering 96% of its value this year, painting a bleak picture for a company that was once the darling of the co-working industry.
WeWork’s impending bankruptcy filing is a stark reminder of the perils of rapid expansion and overvaluation in the startup world. Its once lofty ambitions and market dominance have given way to financial ruin, serving as a cautionary tale for other aspiring unicorns and investors.