Co-working company WeWork’s trouble deepened on Wednesday after its stock tanked 50.99% following media reports about the company’s plan to file bankruptcy next week. The development comes as the SoftBank-backed company continues to grapple with substantial financial deficits, deficiencies in corporate governance, and concerns regarding the leadership approach of its former CEO, Adam Neumann.
The potential bankruptcy comes as WeWork made the decision to refrain from making the interest payment despite having the necessary funds available for the payment. “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,” Jason Benowitz, senior portfolio manager at CI Roosevelt Private Wealth in New York told news agency Reuters.
“WeWork remains a significant tenant in some major urban office markets and its failure or restructuring may further weigh on industry fundamentals,” Jason added.
WeWork’s looming bankruptcy declaration comes in the wake of a sequence of challenges faced by the company. In 2019, the company’s plans to launch an initial public offering (IPO) didn’t go well due to doubts among investors about WeWork’s business model which involved securing extended leases and subletting on a short-term basis.
SoftBank infused billions of dollars in the startup to make it work and WeWork finally went public in 2021 at a much reduced valuation. The company which once boasted of a valuation of a staggering $47 billion is now reduced to just $121 million in market capitalization.
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Updated: 01 Nov 2023, 08:53 PM IST
