WeWork’s Losses Continue To Mount

Published on March 26, 2019 - By Cecilia Amador de San José

• WeWork disclosed this week that its losses more than doubled in 2018, totaling $1.9 billion.
• WeWork’s crippling costs have been far outpacing its revenue for several years now.
• Company executives don’t seem to be worried about this as they prioritize growth over profit-making.

The New York Times reported this week that WeWork’s losses more than doubled last year to about $1.9 billion. Keep in mind that WeWork used its adjusted EBITDA measure to calculate this loss, which strips out costs like taxes and stock-based compensation. This, however, shouldn’t come as much of a surprise considering that WeWork’s crippling costs have been rapidly outpacing its revenue since 2016.

After 9 years of operation and despite the huge financial backing from investors, mainly SoftBank Group — the Japanese conglomerate’s most recent investment totaled $2 billion — WeWork is yet to be a profitable company.

Suggested Reading: “Is WeWork Overvalued? Key SoftBank Investors Think So”

“The costs of the company’s rapid growth stand out, even among the crowd of technology darlings that run huge losses to expand their empires,” Michael J. de la Merced wrote for the New York Times.  It’s also important to note that most tech companies don’t have as many and long term leasehold liabilities as the We Company. These liabilities have led to the We Company’s balance sheets to remain  on the negative side. 

The news comes shortly after WeWork announced it had laid off 300 employees and amidst rumors of the We Company considering an IPO. Should the coworking giant go public, it would have to justify its $42 billion valuation. Furthermore, it could potentially harm the company’s trading value in the long run.

According to the New York Times, “several companies that went public with huge losses, including Groupon and Snap Inc., now trade well below their initial public offering prices.” Plus, shareholders do expect the business they invest in to eventually make money, and that doesn’t seem to be a priority for the We Company.

Company executives reportedly stated that “We’re looking at building this business out, not just maximizing profitability over the next one to two years.”

In other words, the public and investors can expect the We Company to continue burning through cash to power its global expansion in the coworking business and beyond — the company has dived into the education industry, co-living, and reportedly urban design.

Last year, WeWork was forced to sell debt to investors, in the form of ‘junk’ bonds, in order to finance its growing operation —these bonds are already trading at sub-par value. Not long after, the company raised $1 billion in debt from SoftBank.