WeWork Inc. stock plummeted by more than 25 percent in extended trading, after the company said there is “substantial uncertainty” about its ability continue to operate. The company said it had sustained losses and cancelled memberships for its office space.
WeWork announced in a press release on Tuesday that the co-working industry will be focusing over the next year on reducing rent costs, negotiating better leases, raising revenue, and raising capital.
This warning comes just months after WeWork reached a deal with its largest creditors and SoftBank in order to reduce its debt by approximately $1.5 billion, and extend the maturity dates of other obligations. The bonds are trading at very distressed levels. Trace data shows that the company’s 7.875% notes due in 2025, which are unsecured, were last traded for 33 cents per dollar.
WeWork, just a few short years ago was considered one of the most valuable startups in America. Venture capitalists have fueled WeWork’s rise by investing billions to lease out real estate in different parts of the world. Adam Neumann, the co-founder of Airbnb, led a disastrous initial public offering (IPO) in 2019. This resulted in Neumann’s ouster from his position as CEO and required a financial bailout by SoftBank Group Corp.
The Covid-19 epidemic dealt a further blow. WeWork offices, which were empty during the first months of the emergency, showed slow progress in filling up again over the past year. The recovery is not sustainable. WeWork reported that occupancy fell in the second quarter as compared to the prior quarter.
New York’s company also experienced a leadership change. Sandeep Mathrani , who was appointed CEO at the beginning of 2020, left Sycamore Partners in May and became a partner. WeWork has an interim CEO. WeWork announced on Tuesday that three of its independent directors would be replaced by four new members.