WeWork raised “substantial doubt” about its future existence on Tuesday, adding another twist to a dizzying journey that has marked the company’s staggering rise, fall, rebirth, and potential imminent collapse.
The co-working space provider warned investors that, facing losses and fleeing clients, “substantial doubt exists about the Company’s ability to continue as a going concern,” according to its second quarter earnings report. Management laid out plans to improve liquidity and profitability over the next year. But Wall Street recoiled.
WeWork stock (WE) plunged nearly 40% following the announcement.
The grave warning punctuates WeWork’s disastrous run as a public company. Its shares have lost roughly 90% of their value this year, beating down its market cap to $105.5 million as of Wednesday afternoon. WeWork once had a valuation of $47 billion.
The overwhelming losses echo WeWork’s earlier run as a startup. Once valued as one of the most promising enterprises in the tech world, the company’s worth evaporated as it prepared to go public in 2019. As potential investors took a closer look at the company’s financial documents, they raised concerns over its money-losing model. Its curious dealings with co-founder and then-CEO Adam Neumann, also raised alarms, including a widely criticized arrangement that had WeWork pay Neumann $5.9 million for use of the word “We” in its name.
Neumann, seen as an eccentric salesmen, touted his lofty ambitions for the company. While WeWork did business by securing long-term leases and then subletting office space to companies for the short-term, Neumann didn’t see his enterprise as a real estate firm. He pitched WeWork as a transformational technology company that would change the way people work and elevate the world’s consciousness.