WeWork goes from bad to worse

After botching its flotation, WeWork is facing a potentially fatal cash crunch. Digging itself out of this hole won’t come cheap. Matthew Partridge reports.

Adam Neumann of WeWork © Michael Kovac/Getty Images for WeWork

Adam Neumann is struggling to save his company

Japanese conglomerate SoftBank Group is preparing a takeover bid for WeWork, says The Wall Street Journal. The office management company, now the "poster child for start-up excess", is "bleeding cash and [being] shunned by mainstream investors". In exchange for injecting enough money into WeWork to relieve its "looming cash crunch", SoftBank would take control of it. The proposed deal would further sideline WeWork's controversial founder, Adam Neumann, who recently resigned as CEO but retains "substantial" voting power. SoftBank, which has already invested over $10bn in WeWork, reckons it "needs at least $3bn to get through the next year".

SoftBank may want to take over WeWork, but WeWork may have other ideas, says Bloomberg. In order to "avoid having their stakes severely diluted", Neumann and other major stakeholders are hoping that "emergency borrowing" can enable them to "turn around the office-sharing venture". WeWork's banker, JP Morgan, is "discreetly sounding out investors and floating" possible terms for a $5bn financing package that could prevent the loss-making group from "running out of money as soon as next month". The plans are "risky", but could reward investors "handsomely" if the firm does indeed recover.

Is it too late?

Even if WeWork manages to cling on, its business may be permanently damaged, says Dominic Rushe in The Guardian. After years of "breakneck growth", new openings have "all but stopped in WeWork's two largest markets, New York and London, as landlords worry about the company's future". Meanwhile, staff claim that the collapse of the planned initial public offering, and the 2,000 redundancies widely expected to be announced, has created a "toxic" atmosphere.

It's not just WeWork's core business that is suffering, says The New York Times. For example, while it promised that its subsidiary WeLive, which runs managed apartments, "would become integral to the company's future", it only operates in two locations and is being investigated for illegally offering short-term hotel rooms. The education subsidiary WeGrow has also said that it will close its only for-profit school next year. Both offshoots have "become something of a metaphor for the entire company... big promises, but lacklustre results".

Recommended

The times may be changing, but don’t change how you invest
Small cap stocks

The times may be changing, but don’t change how you invest

We are living in strange times. But the basics of investing remain the same: buy fairly-priced stocks that can provide an income. And there are few be…
13 Sep 2021
Change is coming to the German stockmarket as the Dax index expands
European stockmarkets

Change is coming to the German stockmarket as the Dax index expands

Germany's benchmark Dax stock index is to expand to 40 companies from the current 30 amid a broader shakeup of the German stockmarket.
10 Sep 2021
EasyJet rejects takeover bid and announces £1.2bn rights issue
UK stockmarkets

EasyJet rejects takeover bid and announces £1.2bn rights issue

Shares in budget airline easyJet tumbled today after it said it had rejected a rival’s takeover bid and would be raising cash from shareholders and ta…
9 Sep 2021
Why now is a great time to buy Japanese stocks
Japan stockmarkets

Why now is a great time to buy Japanese stocks

Japan’s stockmarket is riding high after its PM announced he was to step down. But there are still plenty of bargains. Saloni Sardana looks at the rea…
9 Sep 2021

Most Popular

Should investors be worried about stagflation?
US Economy

Should investors be worried about stagflation?

The latest US employment data has raised the ugly spectre of “stagflation” – weak growth and high inflation. John Stepek looks at what’s going on and …
6 Sep 2021
Two shipping funds to buy for steady income
Investment trusts

Two shipping funds to buy for steady income

Returns from owning ships are volatile, but these two investment trusts are trying to make the sector less risky.
7 Sep 2021
How you can profit from the power of the grey pound
Share tips

How you can profit from the power of the grey pound

Higher life expectancy and surging asset prices have proved a boon for the baby-boomer generation, which has accumulated vast wealth. Younger generati…
10 Sep 2021