Is a WeWork Bailout on Tap?

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Just two weeks ago, we asked: Is WeWork running out of money?

A WeWork bailout could be coming from JPMorgan or Softbank. Two weeks after the office-sharing giant pulled its IPO, its cash position has deteriorated. CNBC reports that the two banks are examining a plan to offer debt and equity to WeWork. CNBC has said that the cash position is dire. Without a WeWork bailout, the company could collapse in 2019. It was just two weeks ago that we had asked: “Is WeWork running out of money?

Why a WeWork Bailout is Necessary

Two weeks ago, it appeared WeWork had more cash on hand. Early estimates suggested that the firm had enough money to last through Q2 2020. However, new estimates indicate that the firm could run out of cash by mid-November, according to CNBC’s sources.

Earlier this week, Bloomberg cited WeWork’s preference for JPMorgan’s for $5 billion in financing. The alternative from Softbank was reportedly the sale of an equity stake in the company. SoftBank has already sunk $10 billion into the embattled company. 

How Bad is This Situation?

A WeWork bailout wouldn’t be surprising. All one needed to do was look at the company’s IPO prospectus. The firm revealed a $900 million loss over six months. It also revealed it had signed massive leases over the next 15 years. However, the firm had a massive hole in its unfunded obligations. Long-term lease obligations sat at a whopping $17.9 billion.

The concerns about unfunded rents quickly fueled questions about the firm’s corporate governance. The firm fired CEO Adam Neuman and reduced his power in voting shares to prevent majority control.

Meanwhile, the firm has already announced it is laying off thousands of employees. Cost-cutting efforts also fueled the sale of existing businesses and their corporate jet. Without financial assistance soon, we could be looking at a massive collapse that could impact major corporate real estate markets like New York City and Chicago.

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