WeWork to Undergo Reverse Stock Split in Attempt to Avoid Delisting
Introduction
WeWork, the office-sharing company once valued at $47 billion, has announced its decision to undergo a 1-for-40 reverse stock split in an effort to prevent its stock from being delisted.
Stock Performance
Following the announcement, the company’s shares fell by 11%, closing at 14 cents. Since late March, WeWork’s stock has been trading below $1, causing the company’s market capitalization to drop to around $300 million.
Purpose of the Reverse Stock Split
WeWork stated in a filing with the SEC that the reverse stock split is being implemented to regain compliance with the New York Stock Exchange’s requirement of maintaining a minimum closing price of $1.00 per share to sustain continued listing.
Implementation and Impact
The reverse split will take effect after the close of trading on September 1. Although the stock split will not improve the company’s financials or valuation, it would elevate the stock price to $5.60 based on the closing price on Friday. Failure to maintain a $1 share price for 30 days can result in NYSE delisting.
WeWork’s Financial Struggles
WeWork is currently facing significant challenges. The company recently expressed doubt about its ability to continue as a going concern due to mounting losses and dwindling cash reserves. In the first half of this year alone, WeWork reported a net loss of $700 million, following a loss of $2.3 billion in 2022. As of June 30, the company had $205 million in cash and equivalents and total liquidity of $680 million, along with $2.91 billion in long-term debt.
Corporate Collapse and Impact of the Pandemic
WeWork’s precipitous decline has been one of the most notable corporate collapses in recent U.S. history. The company, previously valued at $47 billion by SoftBank, attempted and failed to go public in 2019. The pandemic further exacerbated its struggles as numerous companies terminated their leases abruptly, and the subsequent economic downturn led to even more clients closing their businesses.
Stock Performance Since Going Public
WeWork went public in 2021 through a special purpose acquisition company (SPAC). Since the end of 2021, the stock has lost 98% of its value.
Conclusion
The reverse stock split is WeWork’s latest attempt to salvage its stock price and avoid delisting. However, the company continues to face significant financial challenges, with doubts surrounding its future viability.
