WeWork Inc. (NYSE: WE), the invention of much vilified Adam Neumann who walked off with hundreds of millions of dollars as the fortunes of the company disappeared, looks like it will not come up for air ever again. It recently missed payments on some of its debt, which is a sign it is out of cash and on the brink of folding or being torn into pieces that will be sold off. (These are America’s 25 dying industries.)
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The decision not to make a $95 million payment on some of its debt may also be a chess move meant to bring its creditors down to earth. They can get almost nothing for their investment, or may get a little sum via a deal struck with WeWork management. Either way, WeWork’s public shareholders will have nothing to show.
According to New York Times reporting on negotiations with possible creditors, “I believe they will absolutely understand our decision to enter into the grace period,” said WeWork’s interim chief executive, David Tolley. While that is one point of view, the other is that WeWork is burning through the cash it has so fast that such a stance does not matter.
In the most recent quarter, WeWork lost $397 million on revenue of $884 million. It is a cold comfort that the revenue ticked up slightly from the same period the year before. Cash and cash equivalents on the balance sheet were $205 million.
In a desperate attempt to keep its New York Stock Exchange listing, WeWork completed a 1-for-40 reverse split. However, the company still trades as a penny stock at a price of $2.26, down from a 52-week high of $132.80. Its market cap has dropped to $155 million, which is a stock supported by speculations.
WeWork seems to have a strong business plan. Work from home activity started before the COVID-19 pandemic. WeWork took advantage of this. Many small businesses wanted something like real offices, and the configurations of WeWork offices allowed that. However, WeWork overexpanded, and then came the pandemic. Its offices emptied out, as was the case with most other office-based firms.
WeWork will be a Harvard Business School case study of how a founder can run wild, build a business too fast and leave before it craters completely.
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