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WeWork's Losses Doubled In 2018, Reaching Nearly $2B

WeWork co-founder and former CEO Adam Neumann

The We Company is still losing more money than it makes, relying on its war chest of investment capital as it burns through billions each year.

In a financial report given to investors in its bond debt, WeWork's umbrella company reported that its annual losses reached $1.93B in 2018, double its number from the previous year, The Wall Street Journal reports. Its revenue more than doubled from 2017 to last year, when the coworking giant brought in $1.82B.

The reason for WeWork's losses came as no surprise to anyone that has followed the company in the past few years: ever-increasing expenditures to lease and build out its shared workspaces. WeWork executives told investors that once its spaces are online, they make far more money than they cost to operate. Not as easy to project is the moneymaking potential of the company's acquisitions of tech companies, another major expenditure.

Another drain on the bottom line, the WSJ reports, is the massive interest payments WeWork has incurred from debt investments like the aforementioned bond offering. SoftBank, which has been WeWork's largest investor through its Vision Fund, has been pumping both equity and debt into the company.

Its most recent infusion represented more modest plans; while perhaps at the direction of SoftBank's backers, it could also mean less onerous interest payments in the long run, according to the WSJ.

Both believers and skeptics could find affirmation in The We Company's presentation. In every quarter of 2018, WeWork's revenue growth beat any individual quarter from the year before, and the portion of its business that comes from larger companies has grown to one-third of its total office leasing. But its occupancy dropped from 84% to 80% from the third to fourth quarter last year, and per-member revenue has dropped 13.5% since 2016, according to the WSJ.

WeWork leadership chalked up the occupancy drop to the high number of openings across its portfolio in 2018, saying that each of its coworking locations takes about 18 months to fill once it opens. The per-member drop in revenue was apparently due to openings in new markets that could not justify membership rates of its strongholds in New York and San Francisco.

Even though its rebranding as The We Company signaled its commitment to being a multifaceted company with many revenue streams, office memberships and services (like its Powered by We office design platform) accounted for 93% of its revenue in 2018, according to the report. That could increase concerns that WeWork would be vulnerable to office contraction in the event of a downturn, particularly considering it has been built on short-term, easily canceled leases.