WeWork's Stock Tumbles 37% Amid Bankruptcy Speculations
WeWork's shares plummeted 37% in pre-market trading amidst reports of the company's imminent bankruptcy filing, signaling a mounting wave of losses
WeWork's shares plummeted by 37% in pre-market trading on Wednesday amid reports that the troubled company intends to file for bankruptcy as early as next week due to its growing losses. The flexible workspace provider, backed by SoftBank, is reportedly contemplating seeking Chapter 11 bankruptcy protection in New Jersey, as reported by the Wall Street Journal and Reuters on Tuesday, according to anonymous sources.
A spokesperson from WeWork declined to comment on "speculation," according to CNN. WeWork (WE) announced earlier today that it has reached an agreement with its creditors to extend the 30-day grace period for interest payments on certain debts, which were originally due this week. The company has provided a timeline indicating that the new "forbearance agreement" will end on November 6.
Filing for bankruptcy would signify a remarkable turnaround for a company that was valued at $47 billion in 2019. It would also deliver a significant blow to SoftBank, which has invested billions into the formerly renowned startup.
Russ Mould, the investment director at UK stockbroker AJ Bell, remarked, "WeWork appears to be heading towards a tumultuous demise. SoftBank, its primary supporter, must have reached a stage where it can no longer rationalize rescuing the company."
WeWorks shares have plummeted by 96% this year due to sustained losses and a substantial debt burden. The increasing borrowing costs resulting from interest rate hikes by central banks have further exacerbated the company's financial challenges.
The downfall of the company has been a gradual process that began after a failed initial public offering in 2019. During that time, the company's public filing exposed significantly higher losses than anticipated, as well as potential conflicts of interest involving its founder and former CEO, Adam Neumann.
The company went public after two years with a valuation of approximately $9 billion. However, it has faced ongoing challenges with cash burn and member retention. Members pay to rent desks at WeWork's office spaces. In August, the company expressed concerns about its ability to remain operational and introduced a financial turnaround plan to address these issues.
WeWork made a $694 million loss in the first half of this year, an improvement on the $1.1 billion loss it reported for the first six months of 2022.
