WeWork warns of bankruptcy; share price crashes 38% to near zero for a valuation of just $260 million

WeWork, the startup which was once privately valued at $47 billion, warned that it could go bankrupt. On Wednesday, WeWork shares crashed 38.5% to near zero after the company said there’s substantial doubt about its ability to stay in business as it burns through cash.

WeWork shares have lost nearly all of their value since its debut in October 2021. The stock was trading at 13 cents for a valuation of roughly $260 million. 

The SoftBank-backed company has been suffering with hefty losses, corporate governance lapses and the management style of then founder-CEO Adam Neumann, Reuters reported.

A number of executives have left the company, including CEO Sandeep Mathrani in May and three board members this week. WeWork said that the search for a new CEO was on.

“Fewer and fewer companies from mature large-cap businesses to startups are willing to enter into long-term leases for geographically fixed spaces,” interim CEO David Tolley said on an analyst call on Wednesday, Reuters reported.

WeWork’s business model includes taking long-term leases and renting out spaces for a short term. 

The company’s net loss narrowed to $349 million in the second quarter from $577 million a year ago, but it still burned through $646 million in cash in the first six months of the year. As of the end of June, the company had $205 million cash in hand, according to the Reuters report. WeWork has never turned profitable.

Japanese conglomerate SoftBank, which is one of the major investor in WeWork, has sunk tens of billions to prop up the startup, but the company has continued to lose money.

However, WeWork’s India division said the bankruptcy warning would not affect that unit.

(With inputs from Reuters)