WeWork stock plunges after company raises 'substantial doubt' about its future
Hamza Shaban
·Senior Reporter
Wed, August 9, 2023 at 5:38 PM GMT+1·3 min read
WeWork raised "substantial doubt" about its future existence on Tuesday, adding another twist to a dizzying journey that has marked the company's staggering rise, fall, rebirth, and potential imminent collapse.
The co-working space provider warned investors that, facing losses and fleeing clients, "substantial doubt exists about the Company’s ability to continue as a going concern," according to its second quarter earnings report. Management laid out plans to improve liquidity and profitability over the next year. But Wall Street recoiled.
WeWork stock (WE) plunged nearly 40% following the announcement.
WeWork warned investors in a new financial filing that it has doubts the company can continue doing business. (STRF/STAR MAX/IPx/ AP Photo)
The grave warning punctuates WeWork's disastrous run as a public company. Its shares have lost roughly 90% of their value this year, beating down its market cap to $105.5 million as of Wednesday afternoon. WeWork once had a valuation of $47 billion.
The overwhelming losses echo WeWork's earlier run as a startup. Once valued as one of the most promising enterprises in the tech world, the company's worth evaporated as it prepared to go public in 2019. As potential investors took a closer look at the company's financial documents, they raised concerns over its money-losing model. Its curious dealings with co-founder and then-CEO Adam Neumann, also raised alarms, including a widely criticized arrangement that had WeWork pay Neumann $5.9 million for use of the word "We" in its name.
Neumann, seen as an eccentric salesmen, touted his lofty ambitions for the company. While WeWork did business by securing long-term leases and then subletting office space to companies for the short-term, Neumann didn't see his enterprise as a real estate firm. He pitched WeWork as a transformational technology company that would change the way people work and elevate the world’s consciousness.
The window into the company's financials, however, clashed with Neumann's aspirational vision.
As concerns mounted over WeWork's corporate governance and its path to profitability, the company scrapped plans for an IPO. SoftBank, WeWork's largest outside investor, spent more than $10 billion to bail the company and Neumann out. Neumann stepped down. Later, in a new incarnation, WeWork went public in 2021 through a merger with a special purpose acquisition company.
WeWork's dramatic fall from startup grace captivated the tech and media worlds. In news reporting and dramatic adaptations, WeWork's fall was a story about hubris, greed, and a financial system filled with kowtowing enablers. Its collapse penetrated the national conversation, leaping from news headlines into multiple works of popular art including books, podcasts, a Hulu documentary, and a TV show on Apple TV+ starring Jared Leto as WeWork's Neumann.
The company's current plan to turn its business around included negotiating more favorable lease terms, generating new sales, and seeking additional capital through the issuance of debt, or equity or by selling assets.
During the company's earnings call, WeWork executives provided responses to questions they selected from the investment community and did not directly address the doubts about the company's future.
