WeWork’s Losses Quadrupled To $2.1 Billion In Q1 In Latest Threat To Planned SPAC Offering

WeWork’s Losses Quadrupled To $2.1 Billion In Q1 In Latest Threat To Planned SPAC Offering

WeWork CEO Sandeep Mathrani made headlines a few weeks ago when he declared during an interview that workers who prefer the WFH life to the office are typically “lazier” than their pro-commuting peers. His comment elicited backlash on social media, generating “buzz” that the company’s PR advisers probably pitched as an improvement over the spectacularly bad press that ultimately forced the company to abandon its IPO back in 2019, while its co-founder and CEO Adam Neumann was also forced out over his increasingly erratic behavior.

Now, WeWork is working on a comeback. With a new pitch about dominating the “flex market” for commercial real estate that the firm expects will balloon in the post-pandemic era as companies adjust to the new reality of hybrid-remote work, the firm has apparently recruited a SPAC and some other private backers to assist in finally bringing it public. Back in March, the firm revealed that it lost a staggering $3.2 billion in 2020, which it tried to spin as a positive as the firm slashed practically all of its operating expenses while still coming up with excuses to keep charging customers during the pandemic.

But instead of seeing profits improve in 2021, losses have continued to mount, according to leaked documents published by the FT.

WeWork’s quarterly losses almost quadrupled to $2.1 billion in Q1 (vs. $556 million in net losses in 2020) as the co-working company saw more than 25% of its remaining members finally walk away from their short-term leases. The company was also saddled with hundreds of millions of dollars in expenses tied to “restructuring” its property portfolio.

Another thing: WeWork’s revenue fell almost 50% from $1.1 billion to $598 million.

Here’s a breakdown of the key details from the FT report:

A settlement with ousted co-founder Adam Neumann accounted for about $500 million of the loss.
WeWork’s quarterly revenues fell almost 50% YoY from $1.1 billion to $598 million and the company lost about 200K customers.
The number of WeWork “members” fell from 693,000 in March 2020 to 490,000 a year later.
Restructuring and other related costs ballooned from $56m in the first quarter of 2020 to $494m in the first quarter of 2021.
The results underscore the extent of the challenge for WeWork, which told prospective investors in March that full-year revenues would climb rapidly from $3.2bn last year to $7bn by 2024.
Selling, general and administrative expenses almost halved to $274m between the first quarter of 2020 and the first quarter of 2021.
Posts associated with opening new offices and running existing ones fell about $160m to $852m in the same period.

A source inside the company told the FT that it still has $2.2 billion of liquidity left over from the massive liquidity injection from late 2019, when SoftBank stepped in with $6 billion to save the company from bankruptcy.

Of course, this doesn’t exactly bode well for the company’s second run at an IPO via a SPAC.

Both WeWork and its SPAC backer took to CNBC last month to share their outlook for the company, which revolves around what they see as the total addressable market for the “flex” market.

The BowX deal will pump $1.3 billion in cash into WeWork, $800 million from institutional investors such as Starwood Capital, Fidelity and BlackRock and $483 million in cash BowX raised from retail investors.

Tyler Durden
Thu, 05/20/2021 – 17:40

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