WeWork faces bankruptcy

WeWork is preparing to file for bankruptcy as soon as next week due to overwhelming debt and substantial losses, sources reported.

WeWork declined to comment on what it said is “speculation.”

The company recently consolidated shares to prevent NYSE delisting after a significant stock price drop, which has decreased by approximately 97.9% this year. As of November 1, the stock closed at $2.28 USD, but pre-market indicators suggest a further decline of 37.72%, bringing its value down to $1.42.

In 2021, WeWork went public, encountering skepticism from investors about its business model and persistent losses. Notably, there was concern over its use of “Community Adjusted EBITDA,” a non-traditional financial metric excluding major costs like rent, utilities, and staff salaries. According to a 2018 filing, WeWork defines this metric as “membership and service revenue plus management fee income from advisory services provided to Branded Locations minus community operating expenses.” The company further elaborated, “Community operating expenses, our largest category of expenses, are the costs associated with servicing members in our locations and consist primarily of rent and tenancy expenses, core operating expenses such as utilities and internet, and the cost of creating a dynamic and vibrant community in our buildings, including salaries of our building staff and the cost of amenities. We believe Community Adjusted EBITDA is a supplemental indicator of the day-to-day operations of our existing portfolio of core locations.”

Its valuation, which once stood at $47 billion in 2019, has since dwindled.

The news comes after the CEO’s remarks in August, expressing significant concerns about the company’s financial stability in the upcoming year, attributed to its losses and pressing cash requirements.

Bottom Line: Community is easy to say, hard to define, harder to build and the hardest to monetize.