WeWork Inc – ReportWire

WeWork’s stock has continued the strange trend of the bankruptcy bounce

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In a strange flashback to the demise of Bed Bath & Beyond Inc., WeWork Inc.’s stock soared on its over-the-counter debut this week, just days after the office sharing company filed for chapter 11 bankruptcy protection.

WeWork
WEWKQ,
+23.02%
filed for Chapter 11 in New Jersey on Monday and the beleaguered company’s stock was halted before the open that day. The New York Stock Exchange started the delisting process for WeWork that same day.

Trading resumed over the counter on Wednesday, with WeWork shares ending their first session as an OTC stock up 91.5%.

WeWork Chapter 11 a meme stock reality check: ‘No one should ever buy a stock that is rumored to be headed to bankruptcy’

A similar scenario happened when shares of Bed Bath & Beyond began trading over the counter in May after the Nasdaq started the delisting process for the bankrupt home-goods retailer and sometime meme-stock darling. Despite Bed Bath & Beyond’s well-documented woes, the stock ended its first session as an OTC stock up 30.4%. Bed Bath & Beyond’s shares were canceled in September.

In June Overstock.com acquired Bed Bath & Beyond’s intellectual property, and began operating as Bed Bath & Beyond, before changing its corporate name to Beyond Inc.
BYON,
+2.06%.

Like Bed Bath & Beyond, WeWork has continued to attract investor attention even as the company’s problems mounted. In mid-September WeWork’s stock saw a record run-up amid meme stock chatter, just weeks after WeWork warned that it may not be able to stay in business.

Users on social media noted the activity in WeWork’s share price this week, with Twitter user @asunapg warning Thursday that the OTC markets are “much more volatile and often a death trap for a lot of companies.”

“Here we go again” tweeted @B2Investor Friday, with popcorn and clown emojis.

WeWork’s stock ended Thursday’s session down 21.3% and the stock is down 12.7% Friday, compared with the S&P 500 index’s
SPX
gain of 1.3%.

Tom Bruni, head of content at StockTwits, a social platform for investors and traders, told MarketWatch that, from what he is seeing, there doesn’t seem to be broad interest in the stock.

“Unlike Bed Bath & Beyond and others where it seemed possible to restructure and continue operating, the current situation for WeWork is mainly a math equation,” he told MarketWatch. “It’s looking most likely that it’ll be bought out, the question is at what price and how much cash (if anything) does that leave for common shareholders to receive? The consensus right now is that all value from its 52 million shares of common stock will be wiped out.”

Set against this backdrop, short covering could be driving the stock price up in the short term, according to Bruni. “Many market participants don’t want to risk being squeezed by unexpected good news, so they’d rather take their gains than ride it all the way down to zero,” he said. “Should that high short interest start to create sustainable upside momentum (more than a few days), then we’d likely see other traders get involved on the long side.”

“But for now, with earnings season in full swing, there’s plenty of volatility and news elsewhere for investors/traders to focus on,” he added.

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November 10, 2023

WeWork COO Anthony Yazbeck to leave

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Office-space provider WeWork Inc.
WE,
-8.41%
on Thursday said that Anthony Yazbeck would leave his position of president and chief operating officer, a move that will take hold on Friday. WeWork said in a filing that the departure was “not due to any disagreement with respect to operations, strategy, or any accounting matters, financial statements, financial disclosures or related disclosure controls and procedures.” The decision was made on Oct. 13. Under the terms of the departure, Yazbeck will be entitled to a payment of 874,448 pounds, or around $1.1 million, as well as 360,000 pounds “as payment in lieu of the contractual notice period under Mr. Yazbeck’s employment agreement.” Both payments will be made in cash. Shares were up 2.4% after hours.

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October 19, 2023

WeWork plunges another 11% after announcing reverse stock split to try and keep NYSE listing

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A WeWork co-working office space in Berkeley, California, on Wednesday, Aug. 9, 2023.

David Paul Morris | Bloomberg | Getty Images

WeWork, the office-sharing company once valued at $47 billion, said Friday it will undergo a 1-for-40 reverse stock split to try and keep its stock from being delisted.

The shares fell 11% after the announcement, closing at 14 cents. They’ve been trading under $1 since late March, and the company’s market cap now sits at around $300 million.

“The Reverse Stock Split is being effected to regain compliance with the $1.00 per share minimum closing price required to maintain continued listing on the New York Stock Exchange,” WeWork said in a filing with the SEC.

The reverse split will take effect after the close of trading on Sept. 1, the company said. The move will do nothing to improve the company’s financials or valuation but, based on Friday’s close, it would lift the stock price to $5.60. Failure to maintain a $1 share price for 30 days can trigger a delisting by the NYSE.

With or without a higher stock price, WeWork is in dire straits. Last week, the company said that its mounting losses and dwindling cash “raise substantial doubt about our ability to continue as a going concern.”

WeWork had a net loss in the first half of this year of $700 million after losing $2.3 billion in 2022. As of June 30, it had $205 million in cash and equivalents and total liquidity of $680 million. It has $2.91 billion in long-term debt.

The company has suffered one of the most spectacular corporate collapses in recent U.S. history over the past few years. Valued five years ago at $47 billion by Masayoshi Son’s SoftBank, the company tried and failed to go public in 2019. With its business already struggling, the pandemic caused further pain as many companies abruptly ended their leases, and the economic slump that followed led even more clients to close their doors.

WeWork was taken public in 2021 through a special purpose acquisition company, or SPAC. Since the end of 2021, the stock has lost 98% of its value.

WATCH: CNBC’s Andrew Ross Sorkin gets interview with WeWork founder Adam Neumann

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August 18, 2023

WeWork flags ‘substantial doubt’ about its ability to stay in business

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WeWork Inc. disclosed Tuesday that there’s “substantial doubt” about its ability to continue operating, as the company seeks to improve its financial positioning.

Shares of the company, which provides co-working spaces, were down 33% in Tuesday’s after-hours trading.

WeWork
WE,
-5.50%
lost $397 million in the second quarter and has $680 million of liquidity. In light of its losses and expected cash needs, “substantial doubt exists about the company’s ability to continue as a going concern,” WeWork said in its second-quarter earnings release.

Its ability to continue “is contingent upon successful execution of management’s plan to improve liquidity and profitability over the next 12 months.”

As part of that liquidity planning, WeWork will aim to cut its rent and tenancy costs through restructuring as a renegotiation of lease terms. The company is also looking to boost revenue by lowering member churn, and it will try to rein in expenses and capital expenditures. Finally, WeWork is seeking additional capital through the issuance of debt or equity, or via asset divestitures.

The company was a hot technology player before the pandemic, enabling businesses to obtain flexible arrangements for workspaces, but it’s struggled to find its footing again now that companies and employees have become more comfortable with remote work.

WeWork’s losses narrowed in the latest quarter, though they were still sizable, as the company logged a net loss of $397 million, or 21 cents a share, compared with a loss of $635 million, or 76 cents a share, in the year-prior period. The FactSet consensus was for a 12-cent loss per share, based on three estimates.

The company also managed to grow revenue in its latest quarter, bringing in an $844 million haul on the top line, up from $815 million a year earlier, though analysts had been looking for $850 million.

“The company’s transformation continues at pace, with a laser focus on member retention and growth, doubling down on our real-estate portfolio optimization efforts, and maintaining a disciplined approach to reducing operating costs,” Interim Chief Executive David Tolley said in a release.

The company’s prior CEO stepped down in May.

See more: WeWork bonds sink after top executives resign from cash-burning company

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August 8, 2023

SoftBank sues social media startup it invested in, alleging it faked user numbers

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SoftBank Founder Masayoshi Son is pictured here in 2019 during an earnings presentation.

Tomohiro Ohsumi | Getty Images

SoftBank’s Vision Fund filed suit against the founders of one of its portfolio companies Monday, alleging that they artificially inflated user metrics, lied to the fund about performance and bilked the fund for millions.

Buzzy social media startup IRL launched in April 2021 and was seemingly “one of the fastest growing social media apps for Generation Z,” the complaint in San Francisco federal court alleges.

SoftBank was invested in the company due to its apparently low cost, “strong” user engagement that left it “well positioned for further viral growth” in the same way Facebook and Twitter exploded.

In May 2021, a month after the company launched, SoftBank invested $150 million in IRL through one of the conglomerate’s high-spending Vision Funds, buying $125 million in shares from the company and another $25 million from insiders including CEO Abraham Shafi as well as Noah Shafi and Yassin Aniss, the complaint says.

SoftBank believed that IRL had 12 million monthly active users.

But those numbers were a lie, the complaint alleges. IRL was secretly swarming its own platform with an army of bots, according to the complaint, creating the veneer of a thriving social network which was, in reality, a cover to “defraud investors.”

The plot began to unravel when the U.S. Securities and Exchange Commission opened an investigation into IRL in late 2022. In April 2023, Abraham Shafi was suspended as CEO, and the company dissolved in June.

The suit raises significant questions about the level of scrutiny that SoftBank applied to its portfolio companies. When a third-party assessment of user numbers came in significantly below IRL’s own sales pitch, SoftBank representatives accepted Abraham Shafi’s explanations that they were “definitely not accurate,” according to the suit.

Past missteps from SoftBank include large positions in allegedly fraudulent crypto exchange FTX and devalued property company WeWork. SoftBank’s Vision Funds have faltered significantly since the market highs of 2021, and the conglomerate posted a full-year loss of $32 billion for the fiscal year ending March 31, 2023.

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August 4, 2023

U.S. stock futures slip after three-day break

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U.S. stock index futures slipped lower Tuesday after a three-day break, with Chinese equities wilting on disappointment over the monetary stimulus efforts in the world’s number-two economy.

What’s happening

Dow Jones Industrial Average futures
YM00,
-0.31%
fell 109 points, or 0.3%, to 34,495.
S&P 500 futures
ES00,
-0.26%
dropped 11 points, or 0.2%, to 4,442.
Nasdaq 100 futures
NQ00,
-0.16%
decreased 28 points, or 0.1%, to 15,239.

On Friday, the Dow Jones Industrial Average
DJIA,
-0.32%
fell 109 points, or 0.32%, to 34299, the S&P 500
SPX,
-0.37%
declined 16 points, or 0.37%, to 4410, and the Nasdaq Composite
COMP,
-0.68%
dropped 93 points, or 0.68%, to 13690.

What’s driving markets

Investors were in a cautious mood following the U.S. long weekend in honor of the Juneteenth federal holiday, but that’s after a strong run. The S&P 500 gained 2.6% last week, its fifth week in a row of gains, as the tech-heavy Nasdaq Composite took its winning run to eight weeks.

Mike Wilson, Morgan Stanley’s chief U.S. equity strategist, said both retail and institutional investor sentiment are at their highest levels in over two years.

“We note that the consensus is right about 80% of the time, which means such shifts in sentiment and positioning can often be right as the collective intelligence of the market knows best,” he said. “However, given our fundamental view on growth, we find it hard to get on board with the current excitement and narrative supporting it. In other words, if second half growth re-accelerates as expected, then the bullish narrative being used to support equity prices will be proven correct.”

One event that investors have to weigh is the resumption this fall of student loan payments, and what that may mean for consumers’ disposable income. Student loan payments have been paused since the start of the pandemic in March 2020.

China cut its 1- and 5-year lending rates by 10 basis points, which investors viewed to be modest, particularly after a Friday state council meeting didn’t result in other concrete measures. According to Societe Generale, there were expectations the 5-year rate, the benchmark for mortgages, would be cut by 15 basis points.

The Hang Seng
HSI,
-1.54%
fell 1.5% in Hong Kong.

Alibaba
BABA,
-0.11%,
the Chinese internet giant, also was in the spotlight after announcing that its CEO and chairman will step down to focus on the cloud division, with Brooklyn Nets owner Joseph Tsai becoming chairman.

Tuesday’s economic data include housing starts data, which showed a 21.7% rise in May after a revised 2.9% drop in April. Building permits also climbed 5.2% in May.

A panel later Tuesday will include both New York Federal Reserve President John Williams and Fed Vice Chair for Supervision Michael Barr. On Wednesday Fed Chair Jerome Powell is due to deliver semi-annual congressional testimony.

Companies in focus

Alibaba Group Holding Ltd.
BABA,
-0.11%
shares fell 2.1% in premarket trading after the Chinese e-commerce said Daniel Zhang will step down from chairman and chief executive officer roles. He will stay on to lead the cloud business, due to be spun off.
Nio Inc.
NIO,
-3.98%,
the Chinese EV maker, fell more than 2% , as U.S.-listed stocks played catchup with two days of weakness for China markets. Goldman Sachs cut its growth forecasts for the country and the People’s Bank of China on Tuesday announced cuts in lending rates, the extent of which which disappointed some.
WeWork Inc.
WE,
+13.16%
tumbled 5% as shareholders voted overwhelmingly for a reverse stock split, according to a Securities and Exchange Commission filing on Friday.
Virgin Galactic Holdings Inc.
SPCE,
+16.50%
shares are more than 1.5% higher in the premarket, continuing a rally from last week. The space travel company is preparing for its first commercial flight later this month.