WeWork Inc. (NYSE: WE) has moved close to a catastrophic failure. It recently got $500 million in debt, but the interest rate on it is exceptionally high. With its stock price at $0.26, the company is likely a candidate for bankruptcy. (These are America’s 25 dying industries.)
WeWork CEO Sandeep Mathrani suddenly left after a catastrophic earnings report. Revenue rose 11% to $849 million last quarter. However, WeWork lost $264 million. Its market cap dropped to $208 million just after the announcement.
WeWork restructured its balance sheet on April 17. However, the fact that it needs new capital within weeks after that shows how quickly its fortunes continue to disintegrate.
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In 2019, WeWork was worth $47 billion. It overplayed its hand by adding more and more real estate inventory to expand its business. There seemed to be an endless appetite for businesses that wanted WeWork’s relatively inexpensive space. However, competition, a lack of growing demand and the pandemic ruined its future.
If there is any lesson from the demise of WeWork and its potential bankruptcy, it is that taking any model and expanding it too quickly is a recipe for disaster.
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