WeWork is in serious trouble, and it could be the canary in the coal mine for the US commercial real estate sector.
What’s going on at WeWork?
WeWork dropped a bomb in in its second-quarter earnings on Tuesday.
“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 said.
The shared-workspace giant said it can only stay in business if it improves its liquidity and profitability over the next 12 months. Its bosses plans to lower its rent and tenancy costs by restructuring and negotiating better lease terms, and boost its revenue by attracting and retaining members. They also intend to control its costs and raise fresh capital, it said.
Investors have balked at the situation. WeWork’s stock price is down 95% in the past year alone, and fell sharply in premarket trading on Wednesday. As a result, the company’s market capitalization has dropped below $500 million — a fraction of the $40 billion valuation it once commanded as a private company.