What happened
Shares of work-space company WeWork (WE) tumbled 14% in February according to data provided by S&P Global Market Intelligence. The company, once an up-and-coming leader in its industry, continues to experience a negative reception by the investing community.
So what
WeWork finally went through an initial public offering (IPO) in October 2021, about two years behind its original plan. During that time, the start-up lost funding, ousted its founder and CEO, and went through a protracted transition to whip it into shape. It finally went public at a valuation of $9 billion, down from the $47 billion it would have had in a 2019 IPO. However, even at that reduced price, the stock has gone from bad to worse.
Image source: Getty Images.
WeWork buys or leases real estate that it rents out to small and medium-sized businesses. It operates a flexible workplace model, offering spaces as small as one desk to large spaces of several floors for bigger customers. It has 756 locations in 38 countries, and it offers some subscription types that allow users to take space in different locations as they need it.
The company was founded by visionary CEO Adam Neumann, who became a minor celebrity based on the company's success. But he left in 2019 after it was determined that WeWork was losing massive amounts of money, and that he was leasing some of his own properties to the company. CEO Sandeep Mathrani has been trying to turn the company back around.
In the third quarter, its first reported as a public company, WeWork demonstrated improvement, with revenue increasing 11% over the prior quarter and a smaller earnings before interest, taxes, depreciation, and amortization (EBITDA) loss. It also gave an update in January on December results, which showed 66,000 in gross desk sales, up from 55,000 in November and 43,000 in October. The preliminary consolidated physical occupancy rate was 63%, up from 56% at the end of the third quarter.
There wasn't any specific news about the company in February, but the market in general has been volatile, and as a global real estate company, WeWork is impacted by global upheaval.
Now what
Last week, Bloomberg reported that insiders said WeWork was preparing for another equity offering since its stock had gone so low. The company said in a statement that it "has no plans to issue additional equity at this time," and that liquidity stands at $2.3 billion as of the end of the third quarter.
WeWork stock has plunged to less than half its IPO price. There's too much risk and uncertainty associated with the company right now, and I'd stay away from this hot potato.
