WeWork has warned there is “substantial doubt” over whether it will be able to remain in business as the flexible workspace company scrambles for cash to survive.
The New York-based firm said its status as a going concern was in doubt because of its financial losses and need for cash to stay afloat over the next year.
The company added that it needed to improve its liquidity and profitability over the next 12 months, and would need to raise additional capital to keep operating.
The update sent its shares plummeting by as much as 27% during extended trading in the US on Tuesday.
WeWork said it would be trying to control its expenses, and reduce its rent and tenancy costs by restructuring and renegotiating leases with its landlords.
It will also attempt to retain current occupants of its workspaces, while finding new tenants, and try to raise money by selling some of its assets.
The company made a net loss of $397m (£311m) between April and June, though this was an improvement of $238m compared with the same period a year earlier.
The continued losses and warning about its financial position are just the latest problems for WeWork, once valued at $47bn by the Japanese investment group SoftBank, whose first attempt at a stock market listing collapsed spectacularly in 2019.
This led to the ousting of its chief executive co-founder, Adam Neumann, who tried to market the flexible office rental business as a tech company but whose erratic behaviour and unfettered spending over time began to concern investors, as he built the business to become the biggest private landlord in New York and London.
WeWork’s business model involves leasing buildings and dividing them into office spaces, which it lets out to tenants, including small businesses, startups and freelance workers, all of whom want to avoid paying for permanent office space.
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The company’s interim chief executive, David Tolley, said WeWork had struggled in recent months from “excess supply in commercial real estate, increasing competition in flexible space”, as well as “softer demand” while he said economic volatility had caused more tenants to end their leases and move on.
WeWork’s results for the second quarter contrasted with the positive note sounded by its competitor, IWG, which reported record revenues and a doubling of profits for the first half of the year on Tuesday.
IWG, which operates globally, said it believed hybrid working would become permanent, as since the pandemic most office-based businesses have opted to allow their workers to split their time between their desks and home or another remote location.
Tolley said WeWork was able to “meet the evolving workplace needs of businesses of all sizes across sectors and geographies” and added that the company was working to transform and reduce its operating costs.
