Following media reports indicating that the provider of flexible workspaces was considering declaring bankruptcy as early as next week, WeWork‘s (WE.N) shares plunged about 50% to a record low on Wednesday.
The New York-based company, which has been experiencing significant losses and a high debt load for a few years, was formerly valued privately at $47 billion; today, its market capitalization is only roughly $121 million.
The SoftBank-backed company has suffered a number of hurdles since its initial public offering (IPO) preparations collapsed in 2019 due to uncertainty regarding its long-term lease strategy and short-term rental revenue. This prospective bankruptcy filing would come after a string of failures.
WeWork, which at last went public in 2021 at a far lower valuation than anticipated, continues to be a source of shame for SoftBank, which has invested billions to support the firm but has never made a profit.
WeWork may file a Chapter 11 petition in New Jersey, according to a Wall Street Journal report that was initially published on Tuesday.
Despite having the funds to make the payment, the company elected to postpone paying the interest on its senior notes due in 2025, which was due on November 1st, it announced on Tuesday. WeWork has already issued a bankruptcy warning in August.
WeWork probably has a lot of long-term office leases that will need to be restructured or written down, according to Jason Benowitz, senior portfolio manager at CI Roosevelt Private Wealth in New York. “This is true regardless of whether the company can work out a short-term arrangement with bondholders to avoid going bankrupt immediately.”
“WeWork remains an important tenant in some important urban office markets & its failure or restructuring could further weigh on industry fundamentals.”
After losing about 96% of its value this year, the stock was last trading at a record low of $1.18, the most recent in a run of record lows.