US: WeWork saw a reduction in its losses in Q1 after cutting costs, but is still in the shadow of a delisting notice from the New York Stock Exchange.
The company recorded a year-on-year rise in overall occupancy to 73 per cent in Q1 from 67 per cent. The occupancy rate in the US and Canada rose five percentage points to 69 per cent, and those countries in April had the first month of net positive desk sales for the first time in 12 months.
CEO Sandeep Mathrani said while small- and medium-sized companies were a key driver of demand last year, WeWork is starting to see demand pick up from large enterprise customers.
First-quarter net loss attributable to WeWork narrowed by $171 million to $264 million year-on-year. Consolidated revenue rose 11 per cent to $849 million, helped by a weaker dollar against the euro and the pound that drove up overseas sales.
WeWork recently completed a financial restructuring with investors, including majority shareholder SoftBank, that saw its debt cut by around $1.2 billion and extended most of its debt maturity to 2027.
The restructuring resulted in S&P Global lowering WeWork’s already junk bond rating last week, describing the move is “tantamount to a default”.
WeWork has lost more than 95 per cent of its value since it went public and has received a delisting notice from the New York Stock Exchange as its share price was below $1 a share for 30 trading days.
The stock fell a further 5.5 per cent to 43 cents a share on Tuesday after the company said it doesn’t expect free cash flow to break even until the second half of 2024. As this story was published the share price was still at 43 cents. This time two years ago the share price was around $12.
Piper Sandler analyst Alexander Goldfarb said WeWork’s delay in breaking even “makes management’s affirmation that it does not need to access additional debt ring a little hollow.”
Mathrani said WeWork also is making sure its stock won’t be delisted. The company recently said in a proxy filing it is asking shareholders to approve a reverse stock split, though it might not ultimately pursue this option.
A reverse stock split is a reduction in the number of a company’s outstanding shares in the market that automatically boosts the value of the stock, usually based on a predetermined ratio. For example, a 2:1 reverse stock split would mean investors would receive one share for every two shares that they own.
As of March 31, WeWork’s real estate portfolio consisted of 781 locations across 39 countries, supporting about 904,000 workstations and 664,000 physical memberships. Those include franchised and unconsolidated joint venture markets including India and China.
