Shares of WeWork (NYSE:WE) opened lower by more than 10% after the shared working space company skipped interest payments due on five of its bonds. The payments consisted of $37.3 million in cash and $57.9 million in in-kind payments. As a result, WeWork will now have a 30-day grace period before it defaults on its payment obligations.
During this time period, WeWork will work to negotiate the terms of its loans with its lenders. The company has insisted that it has the necessary cash on hand to make its loan payments and likely wants to receive more favorable terms.
“I believe they will absolutely understand our decision to enter into the grace period,” said interim CEO David Tolley. Tolley was appointed as the interim CEO last May as the company works to find a permanent replacement.
WE Stock: WeWork Misses $95 Million Interest Payment
Shares of WE stock have fallen by about 95% this year in light of WeWork’s financial troubles and the strength of the work from home (WFH) trend. Last month, the company announced that it would try to renegotiate almost all of its leases with landlords in order to cut costs. Tolley also noted that WeWork would exit “unfit and underperforming” locations.
In August, the New York Stock Exchange (NYSE) filed a Form 25 in order to delist WeWork’s warrants and remove them from registration. As of Aug. 23, WeWork’s warrants trade on the over-the-counter (OTC) Pink marketplace under the symbol “WEWOW.”
During the same month, the company announced its intentions to conduct a 1-for-40 reverse stock split following board and shareholder approval. Shares of WE began trading on a reverse split basis as of Sept. 1. While a reverse split does not affect equity ownership, the action usually conveys a negative message to shareholders.
All in all, WeWork’s troubles convey a simple message: stay away from WE stock. The company is obviously in a bad position and also on the wrong side of the WFH trend brought on by the coronavirus pandemic. All of this is on top of the company’s “going concern” warning issued in August.
On the date of publication, Eddie Pan 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.
