WeWork Stock Plunges to 14 Cents: Former Unicorn Faces Delisting Threat

Tech

Monday, 21/08/2023 21:00 WIB

Jakarta, CNBC Indonesia – WeWork stock plunged again. The former unicorn, whose valuation touched US$ 47 billion before entering the stock exchange, has now dropped its share price to 14 cents.

WeWork on Friday last week announced a reverse stock split plan of 1-40 shares to prevent delisting. Instead of being held back, WeWork’s share price sank further and closed at 14 cents (Rp 2,145) per share.

WeWork shares have not been able to penetrate the price of US $ 1 per share since the end of March. WeWork’s current market capitalization is only US$ 300 million (around IDR 4.6 trillion), far below its peak valuation of US$ 47 billion (IDR 720 trillion).

“The reverse stock split was carried out in order to achieve the minimum closing price requirement of US$ 1 per share so that it can continue to be listed on the New York Stock Exchange,” WeWork said in a disclosure to investors.

WeWork’s reverse stock split is effective at the close of trading on September 1, 2023. This step does not affect the company’s valuation or financial performance, but WeWork’s share price can increase to US$ 5.6 per share.

According to NYSE rules, companies that fail to raise their share price above US$ 1 per share for 30 consecutive days can be subject to delisting.

Launching on 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. In fact, 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 to 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.

“Should we fail to improve the liquidity and profitability of our operations, we will have to consider alternative strategies, including restructuring or refinancing debt, 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.

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.

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