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, slid 24% in Tuesday’s after-hours trading.
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.