WeWork, which rents office space to remote, freelance and self-employed workers, said in a statement Tuesday that there’s “substantial doubt” the company will be able to stay in business, citing a “slight decline in memberships” and “increasing competition.”
The statement said “substantial doubt exists about the Company’s ability to continue as a going concern” and that avoiding such a fate is “contingent upon successful execution of management’s plan to improve liquidity and profitability over the next 12 months.”
The statement said that increasing supply of commercial real estate has given consumers more options and it reported a net loss of $696 million in the six months ending in June, though that loss is small in comparison to the same time period one year prior, when the company lost $1.14 billion.
The company’s plan to improve its financial outlook includes negotiating leases to lower rents, reducing member churn, increasing new sales, limiting expenses and seeking additional capital through issuance of debt or equity securities or asset sales, according to the statement.
This news comes months after WeWork struck a deal to restructure its debt. In March, investor SoftBank Group Corp. agreed to convert $1 billion of unsecured notes into equity to allow the company to pay off debt. It also comes as the company’s recovery from the Covid-19 pandemic has slowed. Its offices were emptied in spring 2020 when the virus forced people to social distance and didn’t return to 2019 levels of occupancy until August 2022, when it reported a 72% occupancy rate. After some ebbs and flows, it stands at 72% in the second quarter of 2023, the company reported.
WeWork’s stock fell as much as 33% in after-hours trading Tuesday, going from 20.9 cents per share to 14 cents per share at 6 p.m. Eastern Time.
Despite the fact that the company is losing money, a WeWork spokesperson told Forbes that its revenue has increased, going from $593 million in the second quarter of 2021 to $844 million in the second quarter of 2023. She also noted the company decreased future unposted rent payments by $12.7 billion over the previous four years and has made a $98 million improvement year-over-year to its earnings before interest, taxes, depreciation and amortization.
As of June, WeWork operated 777 locations systemwide across 39 countries with a total of approximately 906,000 workstations and 653,000 physical memberships, according to the company. That’s an occupancy rate of 72%, which is down 1% over last year. The company generates $502 on average per physical member, it said.