WeWork (NYSE:WE) stock briefly rocketed up a staggering 110% today after the company flashed a bankruptcy signal to investors. WE stock closed out the day at a less staggering 46% up. In a filing Tuesday, the workplace management company expressed uncertainty over the company’s ability to continue operating under its current business conditions.
According to the once-thriving company, WeWork’s continued losses have forced the company to consider extreme measures like asset liquidation or debt restructuring.
“Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern,” WeWork noted.
WeWork’s collapse comes as a surprise, given the company’s once spectacular valuation. Indeed, in 2019 investors were licking their lips ahead of WeWork’s potential $47 billion initial public offering (IPO), spearheaded by SoftBank Group (OTCMKTS:SFTBY). In the end, however, WeWork ended up going public via a special purpose acquisition company in 2021, with a valuation of just $9 billion.
WeWork’s decline is largely attributable to the rapid transition to remote work in the wake of the Covid-19 pandemic. Indeed, many companies abandoned their leases with WeWork amid seemingly universal work-from-home policies, leaving WeWork in the lurch. The company had this to say about their situation:
“If we are not successful in improving our liquidity position and the profitability of our operations, we may need to consider all strategic alternatives, including restructuring or refinancing our debt, seeking additional debt or equity capital, reducing or delaying our business activities and strategic initiatives, or selling assets, other strategic transactions and/or other measures, including obtaining relief under the U.S. Bankruptcy Code.”
WE Stock Enjoyed a Trivial Bounce Amid Delisting Concerns
While WE stock’s jump today may warm the hearts of some sentimental investors, it’s otherwise a relatively moot effort, assuming investors aren’t planning on continuing to funnel money into the struggling business.
Indeed, after today’s jump, and subsequent drop, WE is trending at just 18 cents per share, well below the New York Stock Exchange’s $4.00 minimum share price.
Now that isn’t to say that WeWork has no options. The company has mentioned plans to lower its lease costs, and some have speculated that the company’s bankruptcy concerns may give the company leverage with landlords and other creditors. As of last year, WeWork possessed more than 18 million square feet of rentable office space throughout North America.
WeWork’s current goal is to increase both its revenue and profit over the next year in order to avoid bankruptcy. Unfortunately, much of WeWork’s leadership is rapidly abandoning ship, including former Chief Executive Sandeep Mathrani, who resigned from the position in May.
Three more board members resigned last week, citing “a material disagreement regarding Board governance and the Company’s strategic and tactical direction,” said Daniel Hurwitz, who had been chair of the company since May.
WE stock is down more than 80% this year as one of the notable losers of this year’s bull market. The company has shed 97% of its value through its publicly-listed lifetime.
Whether the company manages to make a comeback remains to be seen.
On the date of publication, Shrey Dua 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.
