In a last-ditch effort to regain compliance, WeWork (NYSE:WE) has opted for a 1-for-40 reverse stock split to remain on the New York Stock Exchange. The company says that this reverse split will take effect on Sept. 1. Markets have not responded well to the news, however.
As of this writing, WE stock is plunging by more than 10% and seeing some significant volatility. Not long after warnings of bankruptcy, the workspace provider is doing everything in its power to not lose its spot on a prominent exchange.
At 13 cents per share, though, WE stock truly doesn’t have much further to fall. Even momentum from retail traders likely won’t be enough to save the stock, reverse split or not.
What This Means for WE Stock
Few companies have fallen harder than WeWork this year. The former Silicon Valley darling had all of Wall Street watching closely when it came public in October 2021 via a blank-check merger. But since its debut, WE stock has shed almost all of its value. With the share price so low — down 90% year-to-date (YTD) and 97% over the past 12 months — the company has struggled both to avoid bankruptcy and remain on the NYSE.
That has been an especially tall order recently. As TipRanks reports:
“WeWork is yet to turn a profit, and its share price has nosedived from highs of $13 after going public in 2021 to the current level of $0.16. […] [E]arlier this month, WeWork also cast doubts over its ability to remain a going concern. These warnings came amid financial losses and the company’s requirement for cash.”
Now, the company is throwing out a “Hail Mary” pass via its reverse split with absolutely no guarantee that it will work. Meme stock Mullen Automotive (NASDAQ:MULN) recently tried the same thing and has struggled to remain above $1 per share since.
Of course, WeWork does need the reverse split if it wants a chance to remain on the NYSE. But investors should remember that a reverse stock split is typically employed by companies with no other options for moving forward. This kind of split is often regarded as a last resort before the ship goes down.
WeWork expects WE stock to begin trading on a split basis on Sept. 5. Shares will likely be volatile until then and even afterward, the stock could easily continue to struggle.
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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.
