Burning Through Cash, WeWork Turns to Goldman

September 26, 2019 | Headlines, Latest News, News, Venture Capital
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Analysts suggest We & Co. (formerly WeWork) only has enough cash until June 2020.

Is WeWork running out of money?

According to Bloomberg, WeWork (or We Co.) burning through the green stuff at a torrid pace. The firm may only have enough cash to make it through next spring with daily losses in the millions, say analysts. The firm just ousted its CEO and founder Adam Neumann after nine years on the job (he promised to “change the world.”)

Now, new co-CEOs Sebastian Gunningham and Artie Minson must focus on cutting costs, maybe shedding up to 5,000 jobs, and seeking bank loans and private investments. But, with its IPO in question and facing a shutout from bond markets, they seem ready to break the glass.

Is WeWork Running Out of Money?

Bloomberg reports that the company is working with Goldman Sachs and JPMorgan on a possible $3 billion loan. However, to access those banks’ cash, WeWork also needs to raise money from other sources. Some speculate that the firm may need to return to SoftBank Group for an additional handout.

There’s just one problem. SoftBank investors have been frustrated by the entire failed IPO process. And another report indicates that SoftBank had considered writing down its entire investment in the co-space office company. That total Softbank investment totals $10 billion.

Ugly Numbers at We & Co.

The numbers are questionable right now.

The workspace giant has about $2.5 billion in cash on hand. But at the current burn rate, they may run out of money at the end of the second quarter next year. Fitch Ratings had already downgraded the firm’s debt two months ago with Neumann at the helm. The company had expanded at a breakneck pace to beat rivals to global destinations.

Bloomberg’s reporting shows that the company’s math doesn’t add up. The report indicates that the firm raised $12 billion for workspaces, renovated them, and then leased them to clients.

However, given the 15-year leases that it has signed, it owes roughly $47 billion in future rent costs.

That said, tenants have only committed to payments of $4 billion into the future. And the average lease for each customer is four months.

So, is WeWork running out of money?

Third-grade mathematics would suggest so.

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