WeWork shares sink to record low on reports bankruptcy filing imminent

 Nov 1 (Reuters) - WeWork (WE.N) shares tanked nearly 50% to a record low on Wednesday following media reports that the flexible workspace provider was planning to file for bankruptcy as early as next week.

Indeed, on Friday, October 26, 2023, WeWork's stock fell to a record low amid rumors that the firm will soon declare for bankruptcy.

The findings coincide with WeWork's declining profitability and growing competition from rival co-working locations. Investor pressure has also been applied to the corporation to reduce expenses and simplify its operations.

Being bankrupt would be a significant blow to WeWork, a business that was once valued at over $47 billion. It would also indicate the difficulties the co-working sector is now facing.

What would happen to WeWork's clients and staff in the event that the business filed for bankruptcy remains unknown. Still, both groups would probably be impacted.

Customers may find it difficult to access employees' workplaces, and employees may lose their employment. Additionally, WeWork's assets could be liquidated in order to settle its debts.

A declaration of bankruptcy would be devastating for both WeWork and the co-working space as a whole. It would indicate that the sector is dealing with serious difficulties and that certain businesses might not be able to thrive.

Concerning the rumors of a bankruptcy filing, WeWork has not responded. But the business has stated that it is looking at all of the possibilities to enhance the company's financial results.

The New York-based firm, struggling with a heavy debt load and hefty losses for a few years now, was once privately valued at $47 billion and now has a market capitalization of just about $121 million.

The potential bankruptcy filing would follow a series of setbacks for the SoftBank-backed company since its IPO plans imploded in 2019 on skepticism over its business model of taking long-term leases and renting them for short term.

WeWork, which finally went public in 2021 at a much reduced valuation than initially expected, remains a black spot for SoftBank that sunk billions in efforts to prop up the startup that has never turned a profit.

WeWork is mulling over filing a Chapter 11 petition in New Jersey, the Wall Street Journal first reported on Tuesday.

The company decided to withhold interest payment due on Nov. 1 on senior notes due 2025, even as it has the cash to make the payment, it said on Tuesday. WeWork had warned it could go bankrupt in August.

"Whether or not WeWork can reach a short-term accommodation with bondholders to stave off a near-term bankruptcy, it likely holds 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 a significant tenant in some major urban office markets and its failure or restructuring may further weigh on industry fundamentals."

The stock was last trading at a historic low of $1.18, the latest in a string of record lows, after losing about 96% of its value this year.

Reporting by Medha Singh in Bengaluru; Editing by Shinjini Ganguli and Shounak Dasgupta