Sections

ideals
Business Essentials for Professionals

WeWork Burns More Cash By Fact Paced Opening Up Opens New Sites


10/14/2019


WeWork Burns More Cash By Fact Paced Opening Up Opens New Sites
While WeWork is still to recover from a failed attempt to get publicly listed last month, recent reports have shown that the company has opened up more new sites and locations in the last three and half months than it had done for the first six months of the year. This shows that the company is burning up cash fast even as investors are becoming increasingly critical and skeptical about the prospect of profitability of the business.
 
Reports prepared on the basis of analysis of data derived from the website of the company, as of October 10 there were 622 sites open in 123 cities for WeWork. In comparison at the end of June 30, the number was at 528 locations in 111 cities according to information disclosed by the company in its IPO prospectus.
 
The company website also announces the company will be soon coming up with 89 sites and identified 117 sites as “just announced” - all of which are new locations that have not yet opened for renting. WeWork will soon have 845 locations in 125 cities altogether, the company says on its website.
 
No comments from the company were available to the stories.
 
This fast paced expansion of business by WeWork increases its risks according to analysts. This global brand of shared and rented workplace business concept also faced skepticism from investors about its prospects of making a profit soon enough which resulted in a huge drop in its valuation before the IPO which forced the company to abandon its September 30 listing.
 
Currently the company is in the process of cutting down on costs with the possibility of some job losses and selling off of some of its assets that are the considered not essential for its core business. The aim of such measures by the company is to conserve as much cash as possible. As a part of its closure of peripheral operations, the company will shut down its WeGrow private school in New York City, WeWork has said.
 
According to the IPO document, an average cost of $2.63 million each was expended by the company for design and construction of the 97 new locations that WeWork added during the first half of this year. That was 38 per cent more than the $1.91 million that the company had spent on each of the 82 openings that it had spent in the first half of 2018. It website states that between the start of July and October 10, the company had added 94 new locations.
 
“Investors don’t want to invest in a company with such a high cash-burn rate,” said Gina Szymanski, a portfolio manager at real estate-focused AEW Capital Management LP in Boston. “They have got to slow their growth down and focus a little bit more on profitability.”
 
According to the IPO prospectus that was issued by the company in August, it now has only about $2.5 billion of cash on hand.
 
According to research by AllianceBernstein, at the current speed of cash burning, WeWork is likely to run out of cash by the second quarter of next year. There were other reports that suggested that in the absence of new cash injection, the company could run out of cash before the end of the current year itself.
 
(Source:www.eocnomictimes.com)