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Summary
- WeWork’s total occupancy plummeted 50% in Q1 compared to 47% in the fourth quarter.
- Its first-quarter revenue of US$598 million was nearly half the proceeds in the year-ago period.
- WeWork’s clients declined by 41% to 490,000 in the first quarter, compared to 693,000 members in March 2020.
American office-sharing startup WeWork on Thursday posted a net loss of US$2.06 billion in the first quarter of 2021, battered by a devastating pandemic, large restructuring charges, and falling client base.
WeWork’s total occupancy plummeted 50% in Q1 compared to 47% in the fourth quarter. The losses were compounded by the restructuring charges borne by the company ahead of its public listing. Its first-quarter revenue of US$598 million was nearly half the proceeds in the year-ago period.
Additionally, the company lost about US$500 million in a settlement case with its ousted co-founder Adam Neumann, it said in a release on May 20. In 2020, WeWork had lost about US$3.2 billion.
WeWork’s clients declined by 41% to 490,000 in the first quarter, compared to 693,000 members in March 2020. Restructuring-related costs swelled to US$494m from US$56m in the year-ago quarter, as the company exited from the unprofitable locations.
The work-from-home trend during the pandemic had further intensified its troubles as companies resorted to cost-cutting measures. But things are gradually looking up as the economy gets better and more people are getting back to work, the company said.
The SoftBank-backed commercial real estate firm had secured a US$9billion merger deal with the BowX Acquisition Corp (NASDAQ:BOWX) in March for the public listing after its first attempt at an IPO failed in 2019.
Source: Pixabay.
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The company was worth US$47 billion before the botched IPO attempt. The Japanese conglomerate plans to retain a majority stake in the company after the merger, but it will have a minority representation on the WeWork board. WeWork had expanded aggressively in the run-up to the IPO.
According to the company, the arrangement will fetch up to US$1.3 billion in cash, including US$800 million in private investment from companies like Fidelity Management and Insight Partners.
The transaction is expected to close by the third quarter of 2021.
BowX was founded by industry veteran Vivek Ranadivé, creator of the software company Tibco.
The BowX stock was up 2.4% at the market close on Thursday.
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Neumann’s Exit from WeWork
Neumann’s exit marked a new start for the company, whose valuation had plunged after investors questioned WeWork’s loss-making streak under his leadership, aggravated by heavy spending on some assets. He was succeeded by Sandeep Mathrani, the current chief executive. He had immediately embarked on a cost-cutting drive after his arrival, according to people in the know.
