WeWork (NYSE:WE) declared bankruptcy. Trade was halted on the shares.
The final WE stock trade came in at 83.5 cents per share, a market capitalization of $44 million. At one point, the company estimated its value at $47 billion.
WeWork said bankruptcy filing in New Jersey was agreed to by holders of 92% of its secured debt. The total debt on the filing was $18 billion. The company continues to do business.
WE Stock: Contagion Station
As InvestorPlace reported on Nov. 6, the main fear now is that the bankruptcy will spread contagion throughout the commercial real estate market. WeWork controls 47 properties in New York alone and 60% of the city’s co-working spaces.
WeWork has been hinting at bankruptcy since May. That’s when Sandeep Mathrani, who hoped to turn the company around, resigned. He was replaced by board member David Tolley, who in August raised “substantial doubt” about WeWork’s ability to stay in business. In October, bankruptcy expert Paul Keglevic was brought in as board chairman.
Throughout 2023, WeWork has been trying to renegotiate leases to cut its cash drain. The company’s main rival, Regus, went through a bankruptcy during the pandemic and emerged from it in 2021 as IWG. Bankruptcy limits the rent landlords can recapture but also puts the company’s future at risk.
Softbank (OTCMKTS:SFTBY) CEO Masayoshi Son wound up losing $11.5 billion and his credibility after funding WeWork through his Vision Fund. Co-founder Adam Neumann, on the other hand, wound up with $770 million. The payments were made to get him out of his controlling interest. Neumann put out a statement blaming others for the failure. He now runs a company called Flow.
What Happens Next?
Attention now turns to the underlying commercial real estate market. Some landlords have already defaulted, as the amount owed on their loans is less than the value of the properties.
The valuation of Class B and C buildings will fall, and vacancies will rise. At the same time, New York continues to have a huge housing crisis.
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As of this writing, Dana Blankenhorn 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.
