Nov 1 (Reuters) – WeWork (WE.N) shares fell nearly 50% to a record low on Wednesday after media reports that the flexible workspace provider was planning to file for bankruptcy as early as next week.
The New York-based company, which has had a heavy debt load and heavy losses for a few years now, had a private valuation of $47 billion, and now has a market capitalization of only about $121 million.
The potential bankruptcy filing would come after a series of setbacks for the SoftBank-backed company since IPO plans collapsed in 2019 due to doubts about its business model of taking long-term leases and leasing them short-term.
WeWork, which finally went public in 2021 at a much lower valuation than initially expected, remains a black spot for SoftBank, which has spent billions in its efforts to prop up the startup that has never turned a profit.
WeWork is considering filing a Chapter 11 petition in New Jersey, the Wall Street Journal first reported Tuesday.
The company said on Tuesday that it had decided to withhold interest payments due on November 1 on senior bonds due in 2025, even as it has the cash to make the repayment. WeWork warned of possible bankruptcy in August.
“Whether or not WeWork can reach a short-term settlement with bondholders to avoid bankruptcy in the near term, it will likely retain many long-term office leases that will need to be restructured or written off,” said Jason Benowitz, senior portfolio manager. At CI Roosevelt Private Wealth in New York.
“WeWork remains an important tenant in some major urban office markets and its failure or restructuring could further pressure industry fundamentals.”
The stock last traded at a historic low of $1.18, the latest in a string of record lows, having lost about 96% of its value this year.
(Reporting by Medha Singh in Bengaluru; Preparing by Mohammed for the Arabic Bulletin) Editing by Shinjini Ganguly and Shaunak Dasgupta
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