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WeWork, a company almost going forward to dead end?

  • WeWork provides fully equipped office spaces on lease, catering to startups and businesses.
  • Facing bankruptcy, WeWork's stock value has dramatically declined, with mounting losses and debt.
  • The possible downfall could reverberate in the commercial real estate market, impacting users and industry dynamics, while the company's future remains uncertain.

I am sure, many of us are aware of WeWork’s potential bankruptcy but where did it all start?

What does WeWork do?

They lease office space from builders and property owners, making sure that all necessary amenities are present, such as desks, internet connection, coffee makers, and video conferencing settings. In essence, they offer businesses an all-inclusive option. They then imaginatively package these goods and rent out smaller sections to start-ups who prefer a ready-to-use setup without having to deal with tedious administrative duties.  

What are we exactly looking at?

  • Once worth $47 billion, WeWork shares near zero after bankruptcy warning (Reuters)
  • WeWork is bankrupt? (Finshots)
  • Bankruptcy risk: WeWork has "substantial doubt" it can remain in business (Urbanized)

Given the reports of the WeWork Stock Market, I believe it is more like the fall and the rise and the fall of WeWork. (Source: Stock Analysis)

Stock Analysis

According to CNBC, WeWork's stock has routinely traded for less than $1 per share since about mid-March. Its value fell by 26% during the extra trading period on Tuesday, hitting just 15 cents per share. As a result, the company's market value has now decreased to below $500 million.

WeWork recorded a net loss of $700 million in the first half of this year after suffering a huge loss of $2.3 billion the year before, in 2022. As of June 30, the business has $205 million in cash and readily convertible assets, for a total of $680 million in readily available liquidity. The business also owes $2.91 billion in long-term debt.

What are the repercussions? 

According to a financial report, WeWork has rentable office space totaling more than 18 million square ft throughout the United States and Canada as of the end of the previous year. Therefore, WeWork's probable failure could have a big impact on the commercial real estate market.

According to Stijn Van Nieuwerburgh, a real estate professor at Columbia Business School, the same factors that have lowered prices in the commercial real estate market recently, particularly the shift to remote work caused by the Covid-19 pandemic, are also to blame for WeWork's decline.

Since the start of the epidemic, the incidence of vacant office space has been rising across the country, and, according to real estate services company JLL, it will reach almost 20% in the first quarter of 2023. Which eventually did happen. 

To sum it up, it's going to be a tough time for all the 700,000 people who use WeWork Offices along with the real estate downfall.

But is there a way out? Or is it going to be a dead end?

Personally, the idea of co-working spaces is interesting and do-able but the fact that the way it worked out for a similar kind of Swiss Company - IWG is just going to keep the company afloat and not take the ship to the river bank but also not let it sink it too.

It also depends on the mindset and the ideologies of the new CEO, if  WeWork plans to do so. But above all of this, what happens to the new start-ups who are looking forward to spaces just as WeWork offered? What happens to those? Will WeWork have a new business model? Will there be a new one? Or will it just be a dead end?

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Edited by Shruti Thapa