WeWork, once valued at $47 billion, issues bankruptcy warning
WeWork logo
WeWork, a startup that was once valued at $47 billion, has issued a warning about the possibility of going bankrupt. On Wednesday, the company's stock plummeted by 38.5 percent, closing at just 12 cents.
The company, backed by SoftBank, has faced challenges since its attempt to become a public company in 2019, wheninvestor concerns about losses, corporate governance issues, and its former CEO's management style stalled the plan.
WeWork's business involves both long-term leases and short-term rentals of office spaces. However, the global COVID-19 pandemic made shared office spaces less popular.
Despite going public at a lower price in 2021, WeWork has yet to turn a profit. WeWork's shares have dropped significantly since they first became available to the public in October 2021. As of Wednesday, the shares were trading at just 12cents each, giving the company a total value of about $260 million.
Over time, several top executives have left the company, including CEO Sandeep Mathrani in May and three board members last week.
These ongoing challenges are causing problems for SoftBank, a company that has been providing financial support to WeWork for a number of years. SoftBank's CEO, Masayoshi Son, personally supported WeWork and invested $10 billion after the company's troubled attempt to go public in 2019.
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SoftBank ended up losing billions of dollars due to its investment.Son later expressed regret for his decision, admitting that his judgment was not good.
Furthermore, in an effort to improve its financial situation, WeWork negotiated a deal in March to reduce its debt by about $1.5 billion and postpone some of its debt payments.
Despite these efforts, WeWork still reported a loss of $349 million in the second quarter, although it was an improvement from the $577 million loss the previous year.
However, the company used up $646 million in cash during the first six months of this year. By the end of June, it had $205 million in cash on hand. The company's division in India mentioned that the bankruptcy warning would not affect its operations.
(With inputs from agencies)