WeWork, the real estate startup that once fooled backers into believing it was a $US47 billion (about $65 billion in Aussie terms) tech venture, is downsizing. The co-working company plans to close 40 “underperforming locations,” according to its third quarter earnings report, published Thursday.
After a couple of false starts, WeWork launched its IPO and went public on the stock market last year. Never mind that it took the help of a multi-billion bailout by SoftBank, a special-purpose acquisition (i.e. shell) company merger, or that the final valuation for the deal was just $US9 billion (around $12 billion) — less than one-fifth of what it once was.
And since its 2021 launch as a publicly traded company, WeWork has yet to become profitable. The office space “unicorn” that once nearly collapsed under the leadership of former CEO and wannabe cult leader Adam Neumann still hasn’t found its way to a sustainable business model without him. Meanwhile, Neumann has moved onto greener(?) pastures in the form of blockchain carbon credits and…another real estate company.
In its Thursday earnings report, WeWork said it lost $US629 million (around $873 million) over the last three months, $US568 million (around $788 million) of which was attributable directly to WeWork Inc. To be fair, that is significantly less than the $US844 ($1,172) million in losses reported the same time last year. But its $US817 million (around $1.2 billion) in revenue this quarter fell below market expectations, according to Reuters. And WeWork also lowered its forecasted revenue expectation, citing “slower than expected growth,” as the reason.
And again, it’s a real estate company. It’s not as if WeWork is pouring those millions into ground-breaking technological advances that will pay off long-term. The company doesn’t even buy up properties as an investment. It does not own its buildings. Instead, it leases large office spaces from owners and subdivides that into small, short-term leases. It is the middleman nobody asked for.
WeWork didn’t specify exactly where it would be shuttering locations but said that it expected the move would cut company costs enough to contribute $US140 million (around $194 million) to future earnings. It remains unclear where the rest of the hundreds of millions needed to get the company out of the red are supposed to come from. In the past year, WeWork Inc share prices have fallen by about 78 per cent, and are hovering around $US2.18, as of writing.