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WeWork Reports 'Substantial Doubt' Over Ability To Stay In Business

WeWork publicly revealed doubts about the future of its business in its quarterly earnings release Tuesday.


The coworking giant said in its release that “substantial doubt exists about the Company's ability to continue as a going concern.” It attributed this to losses, projected cash needs, increased member churn and its liquidity levels.

WeWork also listed a number of factors that need to unfold “without limitation” in the next 12 months to sustain its viability. Those factors include reducing rent and tenancy costs, reducing member churn and increasing new sales, controlling expenses and seeking additional capital via debt, equity securities or asset sales. 

The earnings report revealed that the company had a net loss of $397M in the second quarter of the year, an increase from the prior quarter when it lost $299M. The quarter did represent an improvement from its Q2 2022 net loss of $635M, and its revenue grew from $815M to $844M year-over-year. 

The number of physical memberships in WeWork's consolidated portfolio decreased by 15,000 over the three months ending June 30 to 512,000 members. The consolidated portfolio consisted of 610 locations across 33 countries as of June, down from 617 locations three months earlier. 

“In a difficult operating environment, we have delivered solid year-over-year revenue growth and dramatic profitability improvements,” WeWork interim CEO David Tolley said in the release. “Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships.”  

On WeWork's earnings call Wednesday morning, Tolley said the going concern note is a “technical accounting determination” that doesn't consider the company's plans to rein in expenses, raise new capital or increase revenues. 

He said WeWork will continue to look to pare down locations and restructure its leases. The company has already edited or amended 590 of its leases, resulting in a $12.7B reduction in lease payments, but Tolley said its real estate commitments are still WeWork's “primary challenge.” Rent eats up 74% of WeWork's revenues and accounts for two-thirds of its operating expenses.

“I’m laser-focused on addressing this issue, which is critical to future success and profitable growth,” Tolley said.

He said WeWork is “materially oversupplied” in some cities, which is helping to drive down occupancy rates, coupled with the continued lag in overall office usage. In the U.S. and Canada, locations were about 67% occupied, compared to the company's locations in Southeast Asia, where occupancy is over 80%. 

WeWork’s stock has dropped from around $10 per share when it went public in October 2021 to $0.21 per share before it released its earnings Tuesday afternoon, and it then fell by more than 30% in after-hours trading.

The company received a warning in April from the Nasdaq exchange that it would be delisted if it couldn't bring its share price up above $1 within six months. It proposed a reverse stock split that would give Class A common stockholders one share for every 10 they own, a plan that was approved by shareholders and Tolley said would be taken up by the board of directors at its next meeting. WeWork has an October deadline to stave off delisting.

WeWork's descent has been remarkable, going from one of the world's most valuable startups when it was valued by SoftBank at $47B in 2019, shortly followed by a failed, embarrassing attempt to go public that resulted in the ouster of CEO and co-founder Adam Neumann. WeWork finally went public two years later as a $9B venture. As of Wednesday morning, its market capitalization was less than $300M. 

In May, the company announced the departures of its chief financial officer and CEO. On May 16, WeWork announced Sandeep Mathrani, who had served as CEO since February 2020, was resigning, a move that one analyst called a “total shock.” Mathrani also resigned from the board when he left his CEO position. And on May 25, WeWork disclosed that Chief Financial Officer Andre Fernandez would also resign June 1.

Kurt Wehner, previously WeWork’s chief accounting officer, replaced Fernandez as CFO. Tolley replaced Mathrani as interim CEO after joining WeWork’s board in February. The company’s website still lists his role as interim, and it said in May its board is convening a special committee to search for a permanent CEO.

Turnover in the company's upper echelons has continued — three board members stepped down and were replaced by four independent directors, the company announced Tuesday. Daniel Hurwitz, Véronique Laury and Vivek Ranadivé — who led the special-purpose acquisition company that took WeWork public — resigned, to be replaced by Henry Miller, Elizabeth LaPuma, Paul Keglevic and Paul Aronzon. 

UPDATE, AUG. 9, 9:15 A.M. ET: This story has been updated with comments from WeWork's earnings call Wednesday morning.

Related Topics: WeWork, David Tolley