WeWork, the workspace rental company, has posted a $1.25 Billion loss in the third fiscal quarter of 2019. This is the latest of a long string of bad financial news for WeWork, which was only one week away from running out of money when it took a $5 billion bailout from SoftBank in October. This could have a major impact on real estate markets around the country, as WeWork owns an estimated 69% of all coworking space leases in the United States.
WeWork is a commercial real estate company that provides rental spaces for small businesses and freelancers, particularly catering to tech startups. A key feature of WeWork’s model relies on “hotdesking,” where different people would use the same workstation in different shifts, potentially saving on workspace costs and allowing multiple people or companies to effectively rent the same space. The goal is to provide spaces for entrepreneurs and small business owners to run their businesses without needing to bear the costs of renting out a whole building when they don’t need it.
However, WeWork has persistently been unable to turn a profit, and it revealed it was $2 billion in debt at the end of 2018. A planned IPO was delayed after its August 2019 prospectus revealed major problems in its corporate governance and business model, and its CEO and majority shareholder, Adam Neumann, resigned and gave up majority control in September as part of the bailout deal with SoftBank. The latest news about its losses only adds to concerns about WeWork’s long term financial stability, and whether it might be able to turn a profit under new corporate governance.
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