Bloomberg Línea — WeWork claimed during a 13-minute second-quarter earnings call this Wednesday that the company’s main obstacle in reaching profitability and a free cash flow are still a shortage of liquidity and current leasing costs at the buildings it operates.
Between April and June, these factors accounted for 74% of the revenue and over two-thirds of WeWork’s total operating expenses. The company didn’t disclose the numbers for its Latin American operations.
During the call, WeWork only answered two questions about a stock split, the extension of a credit line from SoftBank, and occupancy trends across different regions, although the company did not make any references to Latin America specifically.
WeWork’s shares were down around 39% on Wednesday afternoon, trading at $0.13. The firm’s market cap fell to around $269 million, compared to $47 billion in 2019.
Late Tuesday, after the release of the second-quarter results, the company’s shares had plummeted by 25.7% following a statement to the Securities and Exchange Commission (SEC) communicating “substantial doubts” about its ability to continue operating. WeWork cited ongoing losses and increased membership cancellations. This year, the stock has fallen by about 90%, including trading on this morning.
According to WeWork’s interim CEO, David Tolley, the company’s co-work offices in the United States and Canada had an occupancy rate of 67% in the second quarter, down from 69% a year earlier. In India, it’s around 78%, and in the Pacific region, it’s stable at around 83%.
What is going on with WeWork in Latin America?
In a January interview with Bloomberg Línea, Claudia Woods, CEO of WeWork in Latin America, stated that the regional model is different from the global one as the company operates autonomously. For example, the marketplace product is exclusive to the region.
The operation in the key Latin American countries under Woods’ leadership has two main partners: WeWork and SoftBank, with which a joint venture was established in August 2021.
According to Woods, WeWork was operating independently in Latin America in January and wasn’t required to follow a global strategy nor report its numbers to a global structure, but rather to a board.
Bloomberg Línea contacted SoftBank and WeWork about their operations in the region, between August 8 and 9. SoftBank stated that it doesn’t disclose numbers. WeWork said “the recently published financial statement by WeWork Global reflects improvements in various company indicators, including an increase in revenue as well as a reduction in expenses.”
WeWork Latin America also said that “despite challenges in the real estate market, WeWork LatAm continues to advance, aiming to maintain its leadership in flexible spaces and further drive its growth.”
In the January interview, Claudia Woods mentioned that in 2022, WeWork saw “the world return” to in-person operations, going from 30% occupancy to about 80% occupancy in Brazil. In 2022, the company in Latin America saw a 27% growth in its membership numbers.
Bolivian investor Marcelo Claure, former COO of SoftBank and current head of growth fund Bicycle Capital and chairman at Shein for Latin America, was responsible for the global restructuring of WeWork while he was still part of the Japanese group.
Marcelo Claure’s take on WeWork
Claure took over the leadership of WeWork after co-founder Adam Neumann ceased being the CEO in 2019 following a series of allegations and revelations of inappropriate conduct.
In a May 2022 interview with Bloomberg Línea, Claure mentioned that SoftBank had managed to “fix the company during the pandemic and prepare it for the IPO.”
WeWork, once valued at $47 billion in early 2019, went public through a SPAC in October 2021 with a valuation of $9 billion. “Now the company is on track to deliver profitability in the coming quarters,” Claure stated in May.
WeWork’s ongoing losses
However, Claure’s scenario didn’t materialize. WeWork reported a net loss of $397 million in the second quarter, though it’s down from $635 million a year earlier.
“Along with the rest of our team, I am intensely focused on addressing this issue, which is crucial to our success and future profitable growth,” said WeWork’s interim CEO, David Tolley, during the investor video conference on Wednesday.
The executive highlighted a recent contract with a major technology company in 15 different markets and announced the appointment of four new independent directors to the board.
“Given the challenging market environment, it’s easy to forget that we continue to occupy a unique and important position in the markets we serve. Our value proposition includes global scale, design and quality of our spaces, best-in-class hospitality services, and our ability to provide complementary services that go beyond space for companies of any size,” he said.
The interim CEO also mentioned spending time with the team in Chicago and praised the employees’ support in navigating this moment. WeWork has 3,700 employees worldwide.
“The reverse stock split proposal approved by our shareholders at the last shareholder meeting is on the agenda for our next board meeting. Once the board makes a decision, we will provide an update to the market. As a reminder, we have until mid-October to effectuate the reverse stock split,” he said.
A reverse stock split is a financial operation in which multiple existing shares are consolidated to form a single share. This results in an increase in the price per share while reducing the total number of shares in circulation. In a reverse stock split, several lower-value shares are combined to create a single share with a higher nominal value.
WeWork extended the deadline for a loan granted by SoftBank until 2027 as part of its debt restructuring. Tolley also mentioned that he expects the process of extending underlying loan support to begin later this year or early next year.
-- Updated to add WeWork statement at 6pm BRT
