WeWork stock plummets 37%………………
WeWork’s stock took a nosedive of 37% during early trading on Wednesday, triggered by reports suggesting that the company might be heading for bankruptcy as its financial losses continue to mount.
According to some sources in the know, WeWork, which SoftBank backs, is thinking about seeking protection under Chapter 11 bankruptcy laws in New Jersey. The Wall Street Journal and Reuters both reported this on Tuesday.
When CNN asked for comment, a WeWork spokesperson declined to speak on the rumors.
Earlier the same day, WeWork (WE) announced that it had struck a deal with its creditors to extend the deadline for making interest payments on some of its debts. This grace period was originally due to end this week, but the new agreement will now run until November 6.
If the bankruptcy filing does happen, it will mark a drastic turn of events for a company valued at a staggering $47 billion back in 2019. It will also be a significant blow to SoftBank, which had poured billions of dollars into the once highly-praised startup.
Russ Mould, the investment director at UK stockbroker AJ Bell, summed up the situation, saying, “WeWork seems to be heading towards a messy ending.
SoftBank, its leading supporter, must have reached a point where they can no longer justify saving the sinking ship.”
WeWork, known for its trendy office spaces, has faced a staggering 96% drop in its stock value this year. The reason behind this free fall? Well, it’s mainly because the company has been dealing with mounting losses and a hefty load of debt.
To make matters worse, the costs of borrowing money have gone up due to those interest rate hikes by the big banks.
The downfall of WeWork didn’t just happen overnight. It’s been a slow burn, starting in 2019 when their much-anticipated debut on the stock market didn’t quite go as planned.
They revealed some pretty significant losses and some shady stuff involving their founder, Adam Neumann.
Despite finally going public a couple of years later, valuing themselves at a cool $9 billion, the company couldn’t get their act together.
They were bleeding cash and struggling to keep their customers, the ones who pay to use WeWork’s cool office spaces.
Just a few months ago, they openly admitted that they might not make it, throwing out a “Hail Mary” plan to save themselves from going under.
In the initial half of this year, WeWork recorded a loss of $694 million, which marks an advancement compared to the $1.1 billion loss reported during the same period in 2022.