WeWork says it has doubts about its future, business may go bust
WeWork has doubts about its future as the company says there is a significant level of uncertainty about its ability to continue operating successfully.
In Short
- WeWork says it has doubts about the company's future.
- The company's annual report suggests its financial health is at risk.
- Following this, WeWork's stock dropped by nearly 25 percent in after-hours trading.
WeWork, a company that provides flexible workspaces, is seemingly facing some challenges. In its recent earnings report for the second quarter, the company acknowledged that there is a significant level of uncertainty about its ability to continue operating successfully. This uncertainty led WeWork to issue a "going-concern" warning, which is a notice that public companies issue when they are worried about not having enough funds to cover their expenses over the next year. This type of warning is often a sign that a company's financial health is at risk, as explained by an S&P Global report.
The company attributed its concerns to several factors, including losses it has incurred, the amount of money it expects to have, a higher rate of members leaving, and its current financial situation. After this news came out, the value of WeWork's stock dropped by nearly 25 percent in after-hours trading. This decline adds to a larger trend, as the stock had already decreased by more than 95 percent over the past year.
Despite these challenges, WeWork stated that it is confident in its ability to turn things around. The company's CEO mentioned that the commercial real estate market has an oversupply of space, and there's increased competition in providing flexible workspaces. These factors have contributed to a decrease in demand and an increase in the number of members leaving. The company also reported a decrease in the number of memberships.
However, this announcement didn't reportedly immediately impact the experience of WeWork's customers. The company claims that it can continue to meet the needs of various businesses for workspace and that its long-term goals remain unchanged.
Besides, WeWork has highlighted in its report that the company witnessed a net loss of $397 million in the second quarter, despite generating $844 million in revenue. To address its challenges, WeWork has planned a few things for the coming year to avoid losses. Some of these things are reducing rental expenses, seeking additional funding, and boosting revenue by improving sales and reducing the number of canceled memberships.
