WeWork Shares Plummet as Bankruptcy Looms
November 1, 2023
WeWork (WE.N) shares have taken a nosedive, plummeting nearly 50% to a record low on Wednesday. This comes following media reports indicating that the flexible workspace provider is planning to file for bankruptcy as early as next week.
The New York-based company has been grappling with a heavy debt load and substantial losses for several years. Once privately valued at $47 billion, WeWork’s market capitalization now stands at a mere $121 million.
The potential bankruptcy filing represents another setback for WeWork, which has faced numerous challenges since its initial public offering (IPO) plans fell through in 2019. The IPO debacle was largely attributed to skepticism surrounding the company’s business model of taking long-term leases and renting them out for short periods.
SoftBank, a major backer of WeWork, has been hit hard by the company’s struggles. Despite sinking billions into efforts to prop up the startup, WeWork has never turned a profit. The company finally went public in 2021 at a significantly reduced valuation than originally anticipated.
According to the Wall Street Journal, WeWork is contemplating filing a Chapter 11 petition in New Jersey. Additionally, on November 1, the company decided to withhold interest payment on senior notes due in 2025, despite having the cash to make the payment. WeWork had previously warned of the possibility of bankruptcy in August.
Jason Benowitz, senior portfolio manager at CI Roosevelt Private Wealth in New York, commented on the situation, stating, “Whether or not WeWork can reach a short-term accommodation with bondholders to stave off a near-term bankruptcy, it likely holds many long-term office leases that will need to be restructured or written off.” He added that WeWork’s failure or restructuring could further impact industry fundamentals.
The stock is currently trading at a historic low of $1.18, marking a loss of about 96% of its value this year.
Reporting by Medha Singh in Bengaluru; Editing by Shinjini Ganguli and Shounak Dasgupta
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