S&P Drops WeWork’s Credit Rating, Again

Shared workspace giant WeWork continues to encounter financial challenges. The company previously held a CC rating but has since been downgraded by S&P to selective default (SD).

What’s going on:

Following WeWork’s plea with shareholders to approve a reverse stock split – a move that would consolidate the company’s shares into fewer higher-priced stocks – the Credit Rating Agency S&P Global Ratings chose to downgrade the company to an SD rating. However, the move to downgrade the company’s credit was not directly related, according to Commercial Observer. SD ratings are reserved for firms in selective default.

WeWork previously held a CC rating after being downgraded from a CCC+ in March. According to S&P, a CC rating means that “default has not yet occurred but is expected to be a virtual certainty.” The previously held speculative grade meant that WeWork was considered “highly vulnerable”.

The credit rating downgrade announcement comes before the company releases its new earnings data on Tuesday, May 9. The earnings report is expected to be posted on WeWork’s investor’s website.

Why it matters:

WeWork has spent the first quarter of 2023 announcing steps to help stabilize the balance sheets. Some of these included announcements to cut 300 employees and close 40 locations. In early March, WeWork began important negotiations to restructure its $3 billion in debt from SoftBank. The downgrade of WeWork’s credit rating reflects the company’s continued struggles as it attempts to remain traded on the New York Stock Exchange.

How it’ll impact the future:

S&P’s decision impacts one of the largest companies in the coworking sector. The updated credit rating plays a role in how investors feel about the coworking space industry at large, and the overall perception of the coworking sector as a solid business model.