WeWork warns it might go out of business

SAN FRANCISCO, United States - Embattled office-sharing firm WeWork on Tuesday warned US regulators that it is worried about its survival.

Citing financial losses, cash needs, and a drop in memberships, WeWork said in a filing with the Securities and Exchange Commission (SEC) that "substantial doubt exists about the company's ability to continue as a going concern."

The fate of the New York-based company depends on the "successful execution of management's plan to improve the company's liquidity and profitability," it said in the filing.

WeWork's plan for the year ahead includes restructuring, negotiating more favorable terms on leases, beefing up membership and possibly even issuing debt or selling off assets, the SEC filing said.

WeWork has lost billions of dollars during the first six months of this year, with macroeconomic conditions weakening demand for its shared office spaces, the company told regulators.

WeWork's share price has been below a dollar for months and fell to 16 cents in after-market trading on Tuesday.

WeWork has been trying to turn the page on Adam Neumann, its co-founder and former leader whose antics tired investors.

The company has been in trouble since Neumann's forced departure in late 2019 following WeWork's failed IPO, in which the company's valuation fell from $47 billion to less than $10 billion.

WeWork had been a celebrated star in the sharing economy that put a mammoth footprint in the commercial real estate of major cities around the globe.

Its collapse led to Neumann's departure and cost the main shareholder, Japanese billionaire Masayoshi Son, billions of dollars.

Agence France-Presse

Revamped WeWork rises in Nasdaq debut

NEW YORK, United States - The office-sharing company WeWork made a strong Wall Street debut on Thursday, two years after a previous attempt disintegrated in spectacular fashion.

Shares of the venture that's been revamped with new corporate leaders hovered at around $11.01, or six percent up, on Thursday afternoon, hours after jumping nearly 10 percent shortly after midday, giving it a market value of about $9 billion.

The surge comes two days after shareholders from a special-purpose acquisition company (SPAC) called BowX voted to merge with WeWork.

Shares trade on Nasdaq under the ticker "We."

Known initially for catering to young freelancers, WeWork has turned its focus more towards companies of more than 500 employees looking for space in urban centers.

Those larger firms represent a little more than half of WeWork's clientele, compared to 42 percent at the end of 2019.

Chief executive Sandeep Mathrani, a real estate veteran who was tapped in February 2020, has overseen a major austerity drive, cutting several thousand jobs worldwide and reducing the number of leases.

WeWork generated $658 million in revenue between July and September but continues to lose money. The group, which has 762 workspaces in 38 countries and 150 cities, hopes to become profitable in the first quarter of next year.

The company aims to turn the page on the era of Adam Neumann, the co-founder and ex-boss whose antics and temperamental nature brought the company to the brink of bankruptcy.

'Refocusing' 

Thursday's debut comes two years after the company went into a dramatic tailspin that led to the canceling of its planned IPO and accepting a bailout by Japanese investment firm SoftBank.

To turn things around WeWork appointed Mathrani to lead the company, following Neumann's departure with a hefty severance package.

"WeWork has transformed its business by overhauling its operations and cost structure, rightsizing its real estate portfolio and most importantly -- refocusing on its core product," Anthony Yazbeck, the group's chief operating officer, recently told AFP.

WeWork is banking on the sustainability that labor will be organized in new ways even in a post-pandemic world.

The company has launched a monthly subscription giving access to the common areas of any of the group's buildings around the world.

They also rolled out a pay-per-use service in several countries -- including the United States, Britain and Australia -- allowing users to rent rooms by the hour or by the day.

Agence France-Presse

WeWork hit with big loss despite revenue jump: reports

SAN FRANCISCO, United States - WeWork posted third-quarter losses of $1.25 billion despite the beleaguered office space start-up nearly doubling its revenue, US media reports said Wednesday.

The firm has suffered a dramatic reversal in fortunes since its $47 billion valuation at the start of the year.

In the last two months WeWork canceled its IPO and pushed out co-founder Adam Neumann, albeit with a reported severance package of more than $1.5 billion.

The record-high loss was more than double the red ink logged over the same period a year earlier while revenue soared to $934 million, according to the Wall Street Journal, which cited a report to debt holders by parent company We Co.

Japanese conglomerate SoftBank Group will pump a total of $9.5 billion into WeWork and increase its stake in the firm from 29 percent to around 80 percent in an agreement announced last month.

SoftBank Group last week announced an operating loss of $6.4 billion for the third quarter, the worst in its history, as it took a hit from investments in start-ups including WeWork and Uber.

WeWork offers flexible and shared workspace arrangements, with operations in 111 cities across 29 countries.

To cut costs, the firm stopped construction of new buildings and is selling off some business units, according to SoftBank chief executive Masayoshi Son.

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SoftBank Group profit plunges owing to WeWork turmoil

TOKYO - Japanese giant SoftBank Group suffered an operating loss of $6.4 billion in the second quarter, it said Wednesday, as investments in start-ups such as WeWork and Uber took a massive hit.

In the three-month period ending September 30, operating losses hit a whopping 704.4 billion yen ($6.4 billion).

The firm said first-half operating losses from its Vision Fund and Delta Fund came to 572.6 billion yen, largely "due to a decrease in the fair values of investments including Uber and WeWork and its three affiliates".

Net profit in the six months to September sank 49.8 percent to 421.6 billion yen on an operating loss of 15.6 billion yen.

The company did not publish its outlook for the year to March 2020, but uncertain roads lie ahead as shares in its key investments like Uber and Slack continue to slide.

SoftBank's flamboyant founder Masayoshi Son has faced renewed scrutiny of his investment acumen in the wake of WeWork's dramatic fall from grace.

Last month, SoftBank confirmed that it was injecting billions of dollars into WeWork, once hailed as a shining unicorn valued at $47 billion at the start of the year.

The start-up has gone from an investor darling to cancelling its IPO and seeing its co-founder Adam Neumann pushed out, albeit with a reported package of more than $1.5 billion.

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WeWork's new chairman defends payouts to founder, says company will survive

WeWork's new Executive Chairman Marcelo Claure on Wednesday defended huge payouts to the office-sharing company's founder Adam Neumann and said there is now "zero risk of the company going bankrupt," according to an audio recording of a meeting he held with employees that was reviewed by Reuters.

The meeting took place a day after WeWork's largest shareholder, SoftBank Group Corp, provided a $9.5 billion lifeline and took over the company, including payments to Neumann to give up control.

In response to a question from one WeWork employee, Claure said Neumann was like any shareholder of the company who deserved the right to sell his shares.

"There's a level of gratefulness that we're going to have for Adam, because he's the one who built this business," Claure said.

Neumann has the right to sell his stake in the company for as much as $970 million, sources previously told Reuters, as part of a tender offer in which SoftBank will buy up to $3 billion in WeWork shares from investors and employees. He currently owns a little over one fifth of WeWork.

SoftBank has also agreed to extend him a $500 million loan to repay a credit line from JPMorgan Chase & Co, as well as pay him a $185 million fee for a four-year assignment as a consultant to WeWork, one of the sources said.

'SURREAL TO CRAZY'

WeWork cofounder Miguel McKelvey had kicked off the meeting by introducing Claure to the staff at the company's New York headquarters and addressed the tumultuous few weeks WeWork had experienced.

"I think I've run out of words to describe what's been going on from surreal to crazy to unbelievable to...bonkers," McKelvey said.

In August, WeWork filed for a splashy initial public offering. This week, it was struggling for survival as it has been quickly burning through the cash on its balance sheet.

The IPO was abandoned in September as investors balked at sky-high valuations - a deal in January had tagged its worth at $47 billion. The rescue by SoftBank now values it at just $8 billion.

Investors also questioned both whether its business model was sustainable given big losses it was suffering and the way that Neumann was running the company, triggering his resignation as CEO.

Claure, who was previously CEO of U.S. wireless carrier Sprint Corp, set an upbeat tone during the hour-long meeting at which he encouraged questions.

"My goal is to be part of one of the most amazing comebacks in history and to build jointly with you guys," said Claure, who is also the chief operating officer at SoftBank.

Claure said that the new cash injection meant WeWork was not going to struggle to survive.

However, it was going to focus very differently, he said. "Make no mistake, the world has changed. The growth stories don't sell any more," he said. Adding that the challenge was to "build a company that has an amazing product, that delights our customers, but also makes money."

And that meant deciding which of the markets around the world "makes sense for us to be in, which market doesn't," he said. According to its website, WeWork has 856 office sites in 123 cities that are open or about to open.

Claure said he did not know how many layoffs would take place as WeWork looks to "go back to basics." Sources close to the company have mentioned a range of figures for possible layoffs in recent weeks, from as few as 2,000 to as many as 5,000 out of its 12,500 employees.

Claure said that despite the turmoil, WeWork's landlords were "eager to find different models of working with us."

WeWork had $18 billion in long-term lease obligations as of the end of June, according to its most recent public financial disclosure. It also had $1.3 billion in net debt.

The company is closing or selling a number of businesses outside of the main office-sharing operations. It recently announced it would close the WeGrow private school in New York City after the current school year.

WeWork did not respond to requests for comment. (Reporting by Sheila Dang and Carrie Monahan; Additional reporting by Joshua Franklin Edited by Martin Howell and Bill Berkrot)

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SoftBank in talks to take control of WeWork

NEW YORK — Japan-based SoftBank is ready to buy a controlling stake in WeWork, providing the shared office space startup desperately needed funding at a slashed valuation, a source told AFP on Monday.

Softbank is ready to invest an additional $4 billion to $5 billion in WeWork, taking a majority stake in the New York company while valuing it at $8 billion overall, the source said, asking not to be identified.

WeWork -- which declined to comment on the issue -- had been valued at more than $47 billion earlier this year.

The SoftBank proposal includes offering to buy more than a billion dollars in shares of WeWork from existing investors and employees, among them co-founder Adam Neumann.

Investment bank JPMorgan Chase, which already has an interest in WeWork, was expected to have a debt financing plan for the startup board of directors to consider at a meeting on Tuesday, according to the source.

WeWork needs to raise at least $3 billion to cover its financing needs through the end of the year, according to sources.

If WeWork opts for the SoftBank offer, the Japanese conglomerate headed by billionaire Masayoshi Son will own more than 80 percent of the startup.

The deal would also limit the influence of former chief executive and co-founder Neumann.

Neumann stepped down as chief executive in September amid questions over perceived self-dealing between his personal assets and WeWork, and over unconventional personal conduct, including drug use.

The company also scotched a plan to go public for the foreseeable future, ending one key financing route.

Ratings agencies have downgraded WeWork's bonds to "junk" status due to a cash crunch. The company reported $1.9 billion in losses in 2018 as it expanded rapidly.

The startup, which launched in 2010, has touted itself as revolutionizing commercial real estate by offering shared, flexible workspace arrangements, and has operations in 111 cities in 29 countries.

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Fitch downgrades WeWork after aborted IPO leaves financing hole

NEW YORK, United States - Global credit rating agency Fitch Ratings on Tuesday downgraded WeWork's credit rating by two notches to "CCC+," putting the Softbank-backed office-sharing firm deep into junk territory a day after it abandoned an initial public offering.

WeWork, whose parent We Company lost $1.9 billion in 2018, had hoped to raise at least $3 billion in the abandoned IPO and borrow a further $6 billion in a loan from banks that was contingent on the listing.

"In the absence of an IPO and associated senior secured debt raise, WeWork does not have sufficient funding to meet its growth plan," Fitch wrote in a note.

Additionally, Fitch warned that there is a potential for WeWork's customers, particularly big companies, to "hesitate to sign membership agreements" given the current flux. It said there was no evidence of this yet.

WeWork's rating outlook is also negative, Fitch added.

WeWork declined to comment.

Monday's decision to scrap the IPO marked the conclusion of a tumultuous few weeks for WeWork, which failed to excite investors who raised concerns about its ballooning losses and a business model that involves taking long-term leases and renting out spaces for a short term.

Fellow ratings agency Standard & Poor's last week downgraded WeWork to "B-" from "B".

Both "CCC+" and "B-" are junk bond ratings reserved for corporate borrowers judged to be higher risk to lenders.

WeWork is in discussions with banks as well as its largest investor SoftBank Corp about potential alternative funding, two sources familiar with the matter told Reuters on Monday.

Fitch said it could revisit the rating if WeWork was "able to negotiate a firmly committed financing plan and demonstrate successful implementation of any turnaround plan."

WeWork's 7.875 percent junk bond was last trading at about 84 cents on the dollar, according to MarketAxess, a significant discount to face value, which indicated investor concerns about repayment or doubts about the company securing alternative financing.

WeWork's new co-CEOs Artie Minson and Sebastian Gunningham, who replaced ousted founder and chief executive Adam Neumann last week, have talked about the need to return to WeWork's core business of renting out trendy office space to freelancers and enterprises. That would pull the company back from the fringe activities Neumann had forayed into, such as education.

Given that, Fitch expects WeWork "will face material restructuring cash charges as it reduces its workforce, which had reached over 12,500 in the second quarter."

WeWork had under $2.5 billion in unrestricted cash at the end of June and is due to receive $1.7 billion from SoftBank in 2020, according to Fitch, which estimated that would provide for four-to-eight quarters of funding, without taking into account any potential restructuring costs.

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WeWork throws in the towel on its ill-fated IPO

WeWork's parent The We Company said on Monday it will file to withdraw its initial public offering, a week after the SoftBank-backed office-sharing startup ousted founder Adam Neumann as its chief executive officer.

The withdrawal of its IPO prospectus formalizes the end of the New York-based company's pursuit of a near-term listing and allows Neumann's successors to proceed with the company's financial turnaround without disclosing as much information publicly.

The decision to abandon the IPO marks the conclusion of a tumultuous few weeks for the office-sharing firm, which failed to excite investors who raised concerns about its burgeoning losses and a business model that involves taking long-term leases and renting out spaces for a short term.

Furthermore, experts pointed out that removing Neumann from the CEO role and addressing governance issues was not enough, and that such a business model was unlikely to thrive during an economic downturn.

According to the IPO prospectus it filed earlier in September, We Company had cash and cash equivalents of roughly $2.5 billion as of June 30. However, while revenue doubled to nearly $1.8 billion in 2018, its losses also more than doubled to $1.9 billion.

The decision to scrap the public share sale will also put pressure on WeWork to secure alternative funding, given that a $6 billion loan deal with banks, agreed last month, hinged on a successful share sale of at least $3 billion. Analysts have projected that WeWork will burn through several billion dollars over the next few years and thus needs to keep on raising fresh funds at favorable valuations.

According to two sources familiar with the matter, the company is currently looking to trim its workforce and slow down its expansion in order to burn through less cash and be less dependent on fresh funding.

The company is in talks to raise fresh funding from investors, including SoftBank Corp, the sources added.

SoftBank, which had been pushing WeWork to postpone its IPO and is currently attempting to raise its second $100 billion-plus Vision Fund, is under pressure to assuage key backers of the fund who have raised concerns over the long-term viability of the investment fund.

The decision to withdraw the IPO was no surprise, though. It was widely expected after the company postponed the share sale earlier in September, following push-back from prospective stock market investors over its widening losses and Neumann's unusually firm grip on the company.

"We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong," WeWork's newly appointed co-CEOs Artie Minson and Sebastian Gunningham said on Monday.

"We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future," Minson and Gunningham added.

SoftBank, which owns nearly a third of We Company, invested in the startup at a $47 billion valuation in January. But investor skepticism led to it earlier this month considering a potential IPO valuation of as low as $10 billion, Reuters reported.

We Company had vowed to pursue the IPO and complete the share sale by the end of the year after Neumann stepped down as CEO. However, sources had told Reuters last week that the IPO was unlikely to be completed this year.

WeWork's doomed IPO marks a rough period for startups that have been going public in recent weeks. Last week, US entertainment and talent agency company Endeavor Group Holdings pulled its IPO, while shares of Peloton Interactive Inc, the fitness startup known for on-demand workout programs on its exercise bikes, slid as much as 7 percent in their market debut.

Earlier in September, teeth alignment firm SmileDirectClub Inc opened to an underwhelming debut.

Ride-hailing companies Uber Technologies Inc and Lyft Inc also went public earlier this year with high expectations, but their shares have tumbled since then after investor concerns over their steep losses.

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WeWork founder Neumann: an unconventional leader steps aside

NEW YORK - WeWork co-founder Adam Neumann, whose unconventional approach to business and governance pushed boundaries on Wall Street and Silicon Valley, stepped down as chief executive on Tuesday.

Under pressure from some board members, Neumann will exit the corner office as the company tries to reposition an initial public offering campaign that has sputtered over the last month.

Neumann, who will stay on as chairman, has also faced questions over his perceived self-dealing, as well as the ability of his fast-growing company to become profitable.

Neumann's setback marks a shift in fortune for a charismatic figure who has been embraced by investors even as he has employed unusual imagery to describe the business's meteoric growth since its founding in 2010. 

The company's IPO prospectus says "its mission is to elevate the world’s consciousness."

Neumann's audacious approach to business won support from key investors, including the Japanese group SoftBank.

But his loose approach to corporate governance and conflicts of interest garnered scrutiny, as did a Wall Street Journal expose detailing drug and alcohol use and Neumann's aspirations to become the world's first trillionaire.

Known for long hair and a wardrobe that favors T-shirts, Neumann, 40, is also known as a serial entrepreneur.

BIG AMBITIONS 

Born in Israel, he has described a difficult childhood that included the divorce of his parents and frequent moves.

After serving in the Israeli army for five years, he moved in 2001 to New York. He has lived in the city ever since and it is now WeWork's headquarters.

Neumann initially studied business at Baruch College in the City University of New York but abandoned formal studies to launch his first fledgling business, producing a woman's shoe with a collapsible heel.

A second venture marketed baby clothes with knee and elbow pads, but he told Baruch students at a 2017 graduation ceremony that the venture notched just $2 million in sales compared with $3 million in expenses.

During that period, Neumann also met the woman who became his wife, Rebekah, a cousin of actress Gwyneth Paltrow. The couple now have 5 children.

"The first moment I met my husband, even though he was broke.... I could see that together we were going to create something that was going to be large scale for the planet," Rebekah Neumann said in a November 2018 podcast.

"I just knew he was going to be the man that was hopefully going to help save the world."

Neumann, along with his friend Miguel McKelvey, moved into the shared-office business in 2008.

The company, called Green Desk, was based on "coworking," an old concept but one that was refreshed with new technologies as the financial crisis led to more freelancing and startup ventures, some involving people from finance who lost their jobs.

Neumann describes renters as "members" and built WeWork to be "a community that helped people live life with purpose," according to a blog post earlier this year.

The company today manages more than 500 sites in 30 countries and employs 12,500 people.

But WeWork has struggled with its bottom line, losing almost $2 billion in 2018.

On the jobs site Glassdoor, former WeWork employees praise Neumann's charisma and boundless energy, while others have criticized a cult-like atmosphere.

On Tuesday, Neumann said he was stepping down as CEO, declaring that he was "so proud" of the company's growth.

"While our business has never been stronger, in recent weeks, the scrutiny directed toward me has become a significant distraction and I have decided that it is in the best interest of the company to step down as chief executive," he said.

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WeWork mulls slashing IPO valuation as skepticism rises over business model: sources

WeWork owner The We Company is considering slashing the valuation it will seek in an initial public offering (IPO) to a little over $20 billion, less than half the $47 billion valuation it achieved in a private fundraising round in January, people familiar with the matter said on Thursday.

The We Company's deliberations illustrate how growing investor skepticism over the US office space sharing startup's lack of a roadmap to profitability, and its co-founder Adam Neumann's firm grip on its governance, are weighing on its IPO prospects.

A dramatic drop in the We Company's valuation could also prove to be a seminal moment for the IPO expectations of Silicon Valley unicorns, or startups with a valuation over $1 billion.

Other high-profile stock market listings this year, such as those of ride-hailing companies Uber Technologies Inc and Lyft Inc, have fared poorly in subsequent trading, amid investor skepticism over their lack of a concrete plan to profitability.

In May, Uber completed its IPO at a valuation of $82.4 billion, well below the $120 billion bankers had told the company it could be worth in 2018. It still fared better than the We Company stands to, given that Uber's IPO valuation was higher than its most recent valuation of $76 billion in the private fundraising market.

The We Company has not yet launched its IPO road show to formally solicit feedback from investors. It may begin this process as early as Monday, according to one person familiar with the matter.

The sources cautioned that no decision on the valuation has been taken and asked not to be identified because the deliberations are confidential. The We Company declined to comment. The Wall Street Journal reported earlier on Thursday that the We Company was considering an IPO valuation of around $20 billion.

The We Company rents out workspace to clients under short-term contracts and pays rent for the properties under long-term leases.
The New York-based company lost more than $900 million in the first half of 2019, up 25 percent from a year earlier, even as its revenue doubled to $1.54 billion, as it burned through cash to expand.

The mounting losses and concerns over how its business model would survive an economic downturn have raised skepticism from analysts and investors about the IPO.

Complicating matters further, the company is looking to go public against a turbulent market backdrop, with the US-China trade war making for the worst August for US stocks in four years.

"The market has changed very much since Uber and Lyft went public. What investors want now is an appropriate discount to price in the risk and have greater comfort that it won’t fall below the IPO price," said Barry Oxford, a real estate analyst at D.A. Davidson & Company.

SOFTBANK BACKING

WeWork, which was rebranded We Company earlier this year, is backed by Japan's SoftBank Group Corp, which has invested or committed to invest $10.65 billion since 2017.

We Company Chief Executive Neumann recently met with SoftBank CEO Masayoshi Son to discuss SoftBank making an anchor investment in the IPO to support demand, or making a further private investment in the We Company in order to postpone the IPO, according to the Wall Street Journal.

SoftBank and its affiliates own around 29 percent of the company's shares compared to a 22 percent stake owned by Neumann, Bloomberg reported on Thursday, citing a person with direct knowledge of the matter.

The We Company has also faced a criticism from some investors over its extensive and unusual ties with Neumann, including him being a landlord to the company on some properties, and initial plans to go public with an all-male board.

The We Company has disclosed it paid almost $17 million between 2016 and 2018 for leases on properties owned by Neumann.

The company on Wednesday took some steps to address these concerns by adding a woman, Frances Frei, to its board and announcing that its CEO would return a $5.9 million payment for use of the trademarked word "We."

The We Company has not given a time frame for becoming profitable.
J.P. Morgan Securities and Goldman Sachs are among a nine-member underwriting team for the IPO.

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