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Stocks Of WeWork, Once Valued At $47 Billion, Moves Close To Zero Following Bankruptcy Warning

Stocks Of WeWork, Once Valued At $47 Billion, Moves Close To Zero Following Bankruptcy Warning
WeWork warned it might go bankrupt, sending its shares at zero on Wednesday. This is a shocking turn of events for a firm that was once privately valued at $47 billion.
The SoftBank-backed firm has been in disarray ever since its ambitions to go public in 2019 exploded as a result of investors' backlash over the company's significant losses, oversights in corporate governance, and the management style of its former founder and CEO, Adam Neumann.
WeWork's problems persisted over the next years. Though it finally succeeded in going public in 2021 at a far lower price, it has never generated a profit. Although Japanese firm SoftBank, the startup's key investor, invested tens of billions to support it, the business has continued to lose money.
"WeWork was perhaps the most overhyped startup of recent years," said Steve Clayton, head of equity funds at Hargreaves Lansdown.
On Wednesday, the price of the company's shares dropped 38.5% to 12 cents.
WeWork's shares have lost almost all of its value since its launch through a blank-check merger in October 2021; as of Wednesday, they were trading at 13 cents for a price of about $260 million. Numerous executives have left their positions, including three board members last week and CEO Sandeep Mathrani in May.
WeWork announced on Tuesday that a new CEO search is underway.
The company's business plan entails signing long-term leases and short-term rentals for space. Over time, it grew quickly, but the global coronavirus pandemic reduced demand for shared office space.
"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.
The continuous issues are a disgrace for SoftBank, which has continued to invest in the business for the past few years. Masayoshi Son, the CEO of that business, had personally funded Neumann and, in 2019, after WeWork's failed IPO, provided a $10 billion bailout for the company.
After investing in WeWork, SoftBank suffered losses in the billions of dollars. The company's supporter later expressed sorrow, saying that his "judgement was poor in many ways and I am reflecting deeply on that."
WeWork reached an agreement in March to reduce debt by around $1.5 billion and postpone the maturity of some debt in order to save money.
WeWork nonetheless lost $646 million in cash in the first six months of the year, but cost cutbacks helped the company record a reduced net loss of $349 million in the second quarter compared to $577 million a year earlier. At the end of June, it had $205 million on hand.
"Flexible workspaces have a future in the office ecosystem, but WeWork, in its current state, may not," BTIG analysts wrote on Wednesday as they downgraded the stock to "neutral."
WeWork stated that it intended to reduce rent and lease costs, manage expenses, and curb member churn in order to increase liquidity.
The company's India subsidiary claimed that unit would not be impacted by the bankruptcy warning.

Christopher J. Mitchell

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