Good morning.
As the return-to-work debate continues, WeWork, an office-space leasing company, finds itself in a dire dilemma.
The company, founded by Adam Neumann, released its Q2 2023 earnings report on Tuesday, but management also issued a disturbing “going concern” warning to investors. “Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern,” the company explained in a regulatory filing.
My colleague Will Daniel documents WeWork's woes in his latest article. “WeWork stock has plummeted roughly 40% this week to just $0.13 per share on the news, leaving it down more than 98% since its $13-per-share peak in October 2021,” Daniel writes. “That’s roughly $9 billion of value washed away in less than two years. But zooming further out to the heady pre-pandemic days of 2019, when WeWork was highly touted on Wall Street, it’s an even steeper drop. Japan’s investment conglomerate SoftBank, which has plowed nearly $20 billion into WeWork to date, tagged the firm with a $47 billion valuation prior to its failed attempt at an initial public offering in 2019.”
And there’s been a steep fall. The company’s market cap is now around $270 million, Daniel explains. “And SoftBank revealed in an SEC filing this week that its cumulative loss on its investment in the company is sitting at $18.6 billion,” he writes. You can read his complete assessment of the state of WeWork, “a fallen giant,” here.
Neumann stepped down from his CEO role at WeWork in September 2019, and the company has experienced a lot of executive turnover since then. Sandeep Mathrani joined the company as chairman and CEO in February 2020 and stepped down from the position this past May. WeWork board member David Tolley was appointed as interim CEO. In May 2022, WeWork named Andre Fernandez as the firm’s third CFO in just over two years. However, Fernandez resigned from his position in June. Kurt Wehner, chief accounting officer, was then appointed CFO and treasurer.
At Fortune Brainstorm Tech in July, Neumann mentioned lessons he learned from WeWork’s crash and implied that his team wasn’t “brave” enough to tell him what they really thought.
“Surround yourself not only with the best people and the smartest people but also the ones that are going to tell you what they think,” he said. However, he said during the interview that he did have at least one person in his circle that would push back: investor Marc Andreessen. “Marc called me after an investor presentation and told me everything he disagreed with,” Neumann said.
Hindsight is 2020. But WeWork is still at a crossroads that could potentially lead to bankruptcy.
Sheryl Estrada
sheryl.estrada@fortune.com
