WeWork goes public two years after IPO canceled
“I made a bad decision,” Masayoshi Son, Managing Director of SoftBank, said last year. “I didn’t look well at WeWork.” SoftBank has agreed to limit its voting rights in the company to less than 50%. SoftBank and other investors have to wait several months before they can sell their shares.
The pandemic, which has emptied office towers across the world, has also crushed WeWork’s business.
Traditional landlords survived because tenants were legally obligated to continue paying their one-year leases, most of which remain in effect. But WeWork customers were able to cancel their much shorter-term agreements when they expired. WeWork’s revenue in the second quarter of this year was $ 593 million, well below the $ 988 million in revenue it reported for the first quarter of 2020, its record quarter.
And that partly explains why the company uses cash rather than generating it. In the first half of this year, WeWork consumed $ 1.31 billion in cash to run operations and purchase goods and equipment, more than $ 1.15 billion for the same period of 2020.
Still, WeWork has made strides in reducing its operating expenses – and is hoping it will become profitable if its revenue grows. Some of the biggest savings come from renegotiating leases with landlords or terminating them.
Sandeep Mathrani, chief executive of WeWork, said this month that the company has terminated more than 150 full leases and made 350 lease changes so far this year. “What we did during the pandemic was correct the cost structure, the right size of the business,” he said Thursday in an interview with CNBC.
Perhaps the biggest question hanging over WeWork is whether it will suffer from the downturn in some of the largest office markets or find an opening in a world of work reshaped by the pandemic.
Occupancy levels in office towers in cities like New York, Chicago and San Francisco, among WeWork’s largest markets, are still far below pre-pandemic levels – and may never return to where they were, many companies allowing employees to work entirely or partially from home. In this environment, companies free up their spaces when the leases expire or sublet them. As a result, record amounts of office space are thrown onto the market and rents have plummeted.