WeWork casts doubt over ability to continue as ‘going concern’

U.S.-based office-space leasing company WeWork has informed the regulators that there's substantial doubt about the company's ability to continue as a "going concern" in the wake of mounting financial losses, cash needs and muted memberships.

The statement comes amid the company's latest financial results announcements, which revealed its net loss for the second quarter of 2023 stood at $397 million, a $238 million improvement year-over-year.

The consolidated revenue in the said period was $844 million, up 4% year-over-year. Adjusted EBITDA was -$36 million, a $98 million improvement YoY. As of June 30, 2023, WeWork's physical occupancy also increased marginally to 72% from 70% earlier.

The company, via its latest quarterly report, disclosed that as a "result of the company’s losses and projected cash needs, combined with increased member churn and current liquidity levels, substantial doubt exists about the company’s ability to continue as a going concern."

It adds the company’s ability to continue as a "going concern" is contingent upon successful execution of the management’s plan to improve liquidity and profitability over the next 12 months.

The company's targets for the next year include reducing rent and tenancy costs via restructuring actions and negotiation of more favourable lease terms; increasing revenue by reducing member churn and increasing new sales; controlling expenses and limiting capital expenditures; and seeking additional capital via issuance of debt or equity securities or asset sales.

Notably, amid the global downturn causing demand slowdown, WeWork burned billions of dollars in the first half of the fiscal year, leaving its share price below a dollar for many months now. The Wework Inc stock closed 5.5% down at $0.21 on Tuesday, while it is down 17.02% at $0.17 in the pre-market hours on the New York Stock Exchange.

But according to David Tolley, interim chief executive officer, WeWork, in this difficult operating environment, the company delivered "solid" year-over-year revenue growth and "dramatic" profitability improvements.

“Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships,” he adds.

In India, WeWork manages over 6.5 million square feet of area across 48 locations including the National Capital Region, Bengaluru, Mumbai, Hyderabad and Pune. The company is reportedly in talks to take four lakh square feet of office space on lease in Pune.

As of June 30, 2023, WeWork's total real estate portfolio consisted of 777 locations across 39 countries, supporting 9,06,000 workstations and 6,53,000 physical memberships, equating to physical occupancy of 72%, and a decrease in physical memberships of 1% year-over-year.

Its consolidated real estate portfolio consisted of 610 locations across 33 countries, which supported 7,15,000 workstations and 5,12,000 physical memberships, equating to physical occupancy of 72%, and a decrease in physical memberships of 3% year-over-year. Average revenue per physical member was $502 in the second quarter of 2023, an increase of 4% from the second quarter 2022.