WeWork's future: What to know after the company sounds the alarm on its ability to stay in business

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NEW YORK (AP) — WeWork has sounded the alarm on its ability to stay in business, prompting speculation around the future of the troubled workspace-sharing company. Last week, WeWork warned there was “substantial doubt” about the New York-based company's “ability to continue as a going concern” — which is accounting-speak for having the resources needed to operate and stay in business. WeWork pointed to increased member churn, financial losses and the company's need for cash, among other factors,

, Adam Neumann. WeWork was valued at $47 billion at one point, before investors started to drop off due to Neumann’s erratic behavior and exorbitant spending.

“WeWork’s challenges are a legacy of its earlier and very aggressive expansion... And the costs that expansion continue,” Sam Chandan, director of the Chao-Hon Chen Institute for Global Real Estate Finance at New York University’s Stern School of Business, told The Associated Press. “By many measures, company revenues and performance is improving, but not quickly enough.”

WeWork has not filed for bankruptcy since last week's announcement, and “anything is a possibility,” Samuel Rosen, assistant professor of finance at Temple University's Fox School of Business, notes. “Whether or not this particular company... can actually get out of its current situation, that’s yet to be seen. History would say it’s possible, although I don't know if I would say it’s probable.

In last week's earnings call, the company said that its ability to stay in operation is contingent upon improving its liquidity and profitability over the next 12 months. WeWork plans to negotiate more favorable lease terms, control spending and seek additional capital by issuing debt, stock or selling assets, the company said.

When looking at the total office inventory in the United States alone, 18 million square feet “is a small fraction,” Chandan said — but of course, if WeWork “discontinued meeting its its lease obligations, whether it’s part of a bankruptcy restructuring or some other event... for buildings that have exposure to WeWork, that would be a significant hit.”

 

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