WeWork has skipped interest payments of $95 million that were due on five of its bonds on Monday. As a result, the company has “entered into the 30-day grace period” before a potential default. Shares of WeWork fell by 25% on Tuesday morning, its lowest price on record.
The interest payments include $37.3 million in cash payments and $57.9 million in in-kind payments on its notes. The company stated it has the liquidity to meet these payments and may choose to do so in the coming weeks. During this grace period, WeWork said it intends to negotiate with its creditors and conserve its cash. The company had previously revealed that it was in the process of renegotiating the majority of its leases and had expressed doubts about its ability to sustain its operations.
In a press release on its website on Monday, WeWork wrote: “As such, today we entered into the 30-day grace period provided to us under our secured notes’ indentures and withheld the associated interest payments.”
The news comes just two months after the embattled co-working unicorn startup warned that “substantial doubt exists” about staying in business and one month. In a filing with the Securities and Exchange Commission (SEC) back in August, WeWork said:
“Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern.”
Meanwhile, WeWork CEO David Tolley reassured employees that they will continue to receive their paychecks during the period.
“Today’s action has no impact on our members, employees or our day-to-day operations. Members will continue to receive the exceptional service they signed up for, and the WeWork team remains dedicated to supporting our community around the globe.”
The New York-based WeWork is facing financial challenges again, despite a debt restructuring deal earlier this year that reduced its obligations. The bonds on which WeWork has skipped payments are currently trading at distressed levels, with values as low as 9 cents on the dollar, as reported by Trace and Bloomberg data.
And as if that wasn’t enough, WeWork’s membership numbers aren’t looking as robust as it had hoped, and the company is now pointing fingers at the tough economic times for part of the blame.
WeWork’s demise even managed to make its way onto AppleTV screens. Just last year, Apple TV+ premiered “WeCrashed,” a miniseries that delves into the rollercoaster journey of the company from its ascent to its eventual downfall.
WeWork was founded in 2010 by Adam Neumann and Miguel McKelvey. It provides members around the world with space, community, and services through both physical and virtual offerings. Its mission is to create a world where people work to make a life, not just a living. As of Q2 2019, WeWork had 528 locations in over 111 cities and 29 countries. WeWork reported a third-quarter loss of $1.3 billion from a revenue of $934 million in 2019. The office-sharing startup currently has about 650,000 subscribers worldwide and hopes to hit 1 million by early 2021.
Since its inception thirteen years ago, the New York-based company has been plagued with setbacks and failures. As we noted back in October 2019, WeWork laid off a quarter of its 12,500 employees, fired its CEO Adam Neumann, and canceled its planned IPO.
Before going public, WeWork raised over $20.6 billion in funding over 17 rounds. Its latest funding was raised on August 14, 2020, from a Debt Financing round. The startup is funded by 18 investors. SoftBank and Goldman Sachs are the most recent investors.
In January 2020, investors saw the writing on the wall and ran for cover after the botched IPO. Here is how Reuters reported the story back then: “More than a dozen Silicon Valley-based lawyers, entrepreneurs, and venture-capital investors told Reuters that since the embattled WeWork’s canceled public offering and other ill-fated IPOs, investors have been securing protections of their original investments in “unicorns” – private companies valued at $1 billion or more.”
In October 2018, after the failed IP attempt, SoftBank took control of the struggling real estate startup WeWork slashing its valuation from $47 billion between $7.5 billion to $8 billion. In November 2019, WeWork reported a net loss of $1.25 billion, surpassing its sales. The third-quarter loss more than doubled its loss from the same period the previous year.