WeWork, the startup which was once privately valued at USD 47 billion, warned that it could go bankruptcy. On Wednesday, shares of WeWork crashed 38.5% to nearly zero after the company said there were significant doubts about its ability to stay in business as it burns through cash.
WeWork shares have lost nearly all of their value since their debut in October 2021. The stock was trading at 13 cents for a valuation of nearly USD 260 million.
The SoftBank-backed company has suffered massive losses and failures in the corporate governance and management style of founder and then-CEO Adam Neumann, Reuters reported.
A number of executives have left the company, including CEO Sandeep Mathrani in May and three board members this week. WeWork said the search for a new CEO was on.
"Fewer and fewer companies, from mature large-cap businesses to startups, are willing to enter into long-term leases for fixed geographic acreage," interim CEO David Tolley said on an analyst call on Wednesday.
WeWork's business model includes both long-term leases and renting out spaces for the short term.
The company's net loss narrowed to USD 349 million in the second quarter from USD 577 million a year ago, but it still burned through USD 646 million in cash in the first six months of the year. As of the end of June, the company had USD 205 million in cash, according to a Reuters report. WeWork has never turned profitable.
Japanese conglomerate SoftBank, a major investor in WeWork, has invested tens of billions to prop up the startup, but the company has continued to lose money.
However, WeWork's India division said the bankruptcy warning would not affect that unit.
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