WeWork, the SoftBank Group-backed flexible workspace provider, is poised to file for bankruptcy as early as next week, according to a reliable source familiar with the matter. Stock of WeWork plummeted by 32% during after-hours trading on Tuesday, following the initial report on the imminent bankruptcy by the Wall Street Journal. Throughout the year, the company’s stock has experienced a harrowing decline of approximately 96%. As of today, the downward trend persists.
At the time of this publication, WeWork Inc stock (WE) has witnessed a decline.
WeWork Inc
Current Price: $1.15
Change : -1.13
Change (%): (-49.64%)
Volume: 2.5M
Source: Tomorrow Events Market Data
The company finds itself ensnared in a quagmire of staggering debt and substantial losses, prompting a precipitous decline in its stock value.
Sources cited by the WSJ indicate that WeWork is contemplating the filing of a Chapter 11 petition, with New Jersey being considered as the jurisdiction for the prospective move. WeWork officials have refrained from providing a comment on the matter.
Earlier yesterday, WeWork disclosed an accord with its creditors, allowing for a temporary deferment of payments on a portion of its debt. The grace period for this arrangement is fast approaching its conclusion. As of the end of June, the company carried a net long-term debt of $2.9 billion, coupled with over $13 billion in long-term lease commitments. This financial predicament arises at a time when escalating borrowing costs have cast a pall over the commercial real estate sector.
If WeWork chooses to go ahead with the bankruptcy filing, it would mark a dramatic turnaround for a company whose stock commanded a private valuation of $47 billion just four years ago. Simultaneously, it would constitute a significant setback for its principal investor, SoftBank, which had injected billions into the venture.
WeWork’s trajectory has been fraught with turbulence since its ill-fated attempt to go public in 2019, a venture that collapsed amidst investor skepticism over its unconventional business model. This model involved procuring long-term leases and subletting spaces on a short-term basis, all while grappling with substantial losses. Regrettably, the company’s tribulations did not abate in the ensuing years. It eventually managed to navigate the public offering waters in 2021, albeit at a drastically reduced valuation. SoftBank, the Japanese conglomerate, remained a stalwart supporter, infusing tens of billions to buttress the beleaguered startup. Nevertheless, WeWork continues to hemorrhage funds.
In August, WeWork cast a shadow of doubt on its ability to sustain operations, a foreboding sign reinforced by the exodus of several high-ranking executives, including CEO Sandeep Mathrani, over the course of the year. The future of the company now hinges on the impending bankruptcy filing, as it grapples with the repercussions of its financial quagmire.
