Should investors be preparing for a WeWork (NYSE:WE) bankruptcy? At this point, it certainly seems likely. In just the past month, this former winner has shed more than half its value, falling 54%. It’s been a long time since anything about this company appeared stable. But investors remember when this WE stock lit up Wall Street with an initial public offering (IPO) that caught everyone’s attention.
Since that iconic date in October 2021, though, WeWork went from a Silicon Valley unicorn to an unstable penny stock that reminds everyone just how far the mighty can fall. Shares are currently down more than 90% for the year, and they don’t seem to be slowing down as bad headlines pile up. Now the possibility of declaring bankruptcy hangs over WE stock, casting an even darker shadow over its future.
How likely is WeWork to declare bankruptcy in the near future? Let’s take a closer look at this troubled company and assess what investors should be expecting in the second half of 2023.
What’s Happening With WE Stock
It’s hard to be optimistic about a stock that is trading at only $0.12 per share. WE stock managed to rally earlier today but still hasn’t pulled back into the green. As of this writing, it is down more than 6% and ended the day in the red. Of course, that’s commonplace for WeWork. Any quick jumps in price it has experienced lately have been due to superficial meme stock momentum. Now that bankruptcy seems like an increasingly strong possibility, and the r/WallStreetBets crowd may be eyeing it as a potential target.
If WeWork is on the brink of bankruptcy, it would not be unusual for retail traders to close in. Earlier this month, the company issued a ‘going concern’ regarding its ability to continue operations. As InvestorPlace assistant news writer Shrey Dua reported, this news briefly sent WE stock up 110% though it would ultimately close out the day with gains of less than 50%. More recently, there’s been even more grim news. Yesterday, the New York Stock Exchange announced that it had begun delisting WeWork’s warrants. WE stock can keep trading there as long as it stays above $1 per share, but right now, that doesn’t seem likely.
Recent reports indicate, though, that WeWork is still maneuvering to avoid bankruptcy. Bloomberg reports that it is hiring advisors to assist with the process of restructuring in a way that could help them avoid Chapter 11. Per the article:
“The co-working giant has hired real estate adviser Hilco Global, once again tapped consultant Alvarez & Marsal and re-engaged law firm Kirkland & Ellis for advice on its options, according to the people, who asked not to be identified because the matter is private. The company is seeking to avoid a Chapter 11 bankruptcy filing and restructure its debts out of court, one of the people said.”
This news is likely part of what is pushing WE stock down today. But it is important to note that this unstable meme stock doesn’t need help from unflattering headlines to struggle. It has done a fine job of that on its own.
The Bottom Line
As of now, the future of WeWork remains highly uncertain. But today’s news doesn’t mean that it can avoid bankruptcy.
Declaring bankruptcy would be the final nail in its coffin, and the company clearly isn’t willing to give up just yet. But it is facing an uphill battle, and investors have increasingly less reason to bet on it.
The strong volatility of the current real estate market doesn’t help either. While it may be premature to say that WeWork is currently on the brink of bankruptcy, it is clearly moving quickly in that direction.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
