What’s going on:
On Monday, WeWork asked its shareholders to approve a “reverse stock split” in a new effort to help elevate its share price, according to The Real Deal. A reverse stock split is when a company consolidates the number of existing shares of stock into fewer (higher-priced) shares, according to Investopedia.
This comes on the heels of the announcement on April 18 that the New York City-based co-working firm received a non-compliance notice from the New York Stock Exchange. The notice came after the company’s average share price fell below $1 for 30 consecutive days and started a six-month countdown clock for WeWork to avoid being delisted from the exchange.
The plea to shareholders is being made as the probability of being delisted looms even larger given that WeWork’s share prices closed on Tuesday at 41 cents per share – a 9 percent drop in value since the company received its non-compliance notice.
Why it matters:
WeWork’s share prices have struggled ever since the company decided to go public on Oct. 21, 2021. The company has a 52-week low of $0.39 and a 52-week high of $8.08.
The news of WeWork asking shareholders to approve this new stock maneuver arrives at a time before the company is slated to release its earnings data on Tuesday, May 9.
Analysts forecast that WeWork will post a loss per share of $0.40 for the quarter, according to BestStocks. While a stock split won’t directly or dramatically impact the company’s earnings report, it may indirectly influence investor sentiment and the perception of the company’s efforts to turn things around financially.
The earnings report is expected to be posted on WeWork’s investor’s website.
How it’ll impact the future:
WeWork is ranked as one of the largest coworking companies in the United States. If the company does not raise its share price, its stock may become listed as a “penny stock” subject to restrictive regulations imposed by the SEC, according to The Real Deal.
This move could impact the coworking industry as it reflects the challenges faced by one of the largest providers of flexible workspace solutions. The potential success – or failure – of WeWork’s strategy may influence how investors feel about the coworking space industry at large, and the overall perception of the coworking sector as a solid business model.