WeWork says it doesn’t expect to hit its 2020 financial targets as it grapples with the coronavirus outbreak.
The impact of the virus “will likely have a negative impact” on the company, including on forward-looking information that it previously disclosed, CEO Sandeep Mathrani and executive chairman Marcelo Claure wrote in a letter to bondholders on Thursday.
“In light of recent events relating to the Covid-19 pandemic and given the uncertainty of the current environment, we no longer expect to meet the previously disclosed targets for 2020,” the executives said in the letter. “We are in the process of reviewing and reevaluating the previously disclosed forward-looking information related to our other interim targets,” the executives said.
WeWork said it had US$4.4-billion in cash at the end of last year, enough liquidity for the troubled company to execute its turnaround plan even while navigating “near-term challenges and volatility” caused by the outbreak.
WeWork bonds maturing in 2025 last traded at 35 cents on the dollar, according to data from Trace.
The New York-based company said its revenue rose 90% in 2019 to $3.5-billion, according to the letter, which did not disclose whether it turned a profit. It had recorded $1.5-billion in revenue through the first six months of 2019, according to its initial public offering filing. It reported a net loss of $1.25-billion in the third quarter.
WeWork had expected the fourth quarter of 2019 to be its first period as a public company. It calibrated the business to burn through the money it raised by leasing more office space and bringing in more customers. Those deals were already set in motion and couldn’t be stopped, even when the IPO imploded. The company has since shifted to focus on profitability instead of growth.
Cutting expenses
WeWork spent the last few months of 2019 rapidly trying to cut expenses. The company said in November it was eliminating about 2 400 jobs and has sold several companies it acquired, often at steep discounts.
The global pandemic is challenging WeWork’s already weakened business. Its largest investor, SoftBank Group, threatened last week to unravel part of its deal to buy WeWork stock from investors and employees, including its ousted CEO Adam Neumann. Two board members signalled they were prepared to fight to ensure SoftBank goes through with the deal.
The company has temporarily shut down its locations when required by local authorities or when a customer in a building has been diagnosed with Covid-19. Otherwise, it has kept most buildings open. That has garnered criticism from customers, who say WeWork shouldn’t be charging them rent and encouraging people to go to the office when many are under shelter-in-place orders.
More than a quarter of WeWork’s customers were on month-to-month leases as of last June, and many could choose not to renew contracts. In addition, some tenants could default on their monthly payments.
“While the world navigates the Covid-19 pandemic and grapples with the uncertainty of what lies ahead, WeWork remains committed to supporting our members, many of which are essential to our society,” Mathrani and Claure wrote on Thursday. — Reported by Ellen Huet and Gillian Tan, (c) 2020 Bloomberg LP
