Editor, CNBC Indonesia
Tech
Wednesday, 09/08/2023 15:25 WIB
Jakarta, CNBC Indonesia – WeWork is on the verge of bankruptcy because it runs out of cash. This coworking space company was previously valued at US$ 40 billion (around Rp. 607 trillion) by Softbank, a big-name startup investor and GoTo shareholder.
In an information disclosure, WeWork states that negative cash flow threatens to bankrupt the company. WeWork has now been operating as a public company for four years, after going through an IPO process that caught the world’s attention.
“Losses and negative cash flows from operating activities cast substantial doubt on our ability to continue,” WeWork said.
WeWork was once a unicorn startup with the highest valuation in the world. Softbank, a company owned by Masayoshi Son who actively invests in the world’s largest technology companies, is one of WeWork’s largest financiers and gives it a valuation of US$40 billion.
The problem has been with WeWork for a long time. However, according CNBC International, News about the company’s condition shocked the market because the company founded by Adam Neumann had its name printed on skyscrapers in big cities around the world.
The pandemic is a major factor that has made WeWork’s finances bleed. WeWork space rental companies stopped their rentals due to implementing work from home policies and have not returned after the pandemic ended, affected by the slowdown in economic growth.
The combination of these problems caused WeWork’s debt to pile up while the incoming cash flow was still congested.
“If we fail to improve the liquidity and profitability of our operations, we will have to consider alternative strategies, including debt restructuring or refinancing, seeking additional debt or new funding, reducing business activity or selling assets, and other strategic steps including the means available under US bankruptcy regulations.” said WeWork.
WeWork shares have now plunged to below $1 for the first time since mid-March. WeWork’s market capitalization has now fallen to under $500 million.
In the first half of 2023, WeWork’s net loss reached US$ 700 million after a loss of US$ 2.3 billion in 2022. As of June 30, WeWork had US$ 205 million in cash and cash equivalent assets and US$ 680 million in liquidity. WeWork’s long-term debt is US$ 2.91 billion.
Controversial IPOs
WeWork first published its prospectus in August 2019. The financial statements released to the public became the talk of the town because of high expenses and the “odd business relationship” between Neumann and the company.
The IPO plan failed. Son once called Softbank’s investment in WeWork “stupid”, then the company took majority control in WeWork in a $5 billion deal. Neumann was kicked from the company.
WeWork eventually went public through a merger with a shell company in the form of SPAC.
The main factors that determine WeWork’s survival or failure are limited capex management, ability to boost revenue, and whether or not the company can seek additional capital through debt or issuing new shares.
It’s just that the problems at WeWork continue to grow. Three members of WeWork’s board of directors resigned last week due to “differences of opinion regarding the company’s oversight and strategy.”
In addition, WeWork does not currently have a permanent CEO. CEO Sandeep Mathrani has stated that he will leave and his replacement has not been announced.
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(the/the)
2023-08-09 08:25:00
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