WeWork Bonds Plunge As Company Officially Pulls IPO Filing

From WeWork Co-CEOs:

"We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong."

And the reaction was swift with bond prices tumbling to record lows (and the cost of funding for the real estate middle man to record highs)...

Source: Bloomberg

Full Press Release:

WeWork will file a request to withdraw the Registration Statement on Form S-1 that was initially filed with the Securities and Exchange Commission on August 14.

Co-CEOs Artie Minson and Sebastian Gunningham said, “We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong. We are as committed as ever to serving our members, enterprise customers, landlord partners, employees and shareholders. We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future.”

We suggest something about the "core" is anything but "remaining strong"...

Focus indeed. As a reminder, we noted that WeWork only has a few months left...

....getting new capital is critical: as shown in the chart above, the company lost $690 million in the first six months and is expected to generate a loss from operations approaching $3 billion as it burns through tens of millions in cash daily. Which means that according to analyst estimates, with its existing $2.5 billion in cash as of June 30, the company could run out of money by mid-2020.

Such numbers could spell the end to Neumann’s profit-less growth ethos. When Fitch Ratings downgraded the company’s debt in August, it said the company had made a choice to prioritize growth over profitability by planning for more than 1.25 million new desks -- more than twice what’s currently available -- and plans to open in 175 new cities globally.

Worse; for next year alone WeWork had planned to add 725,000 new desks at a cost of about $4.5 billion, S&P Global Ratings has estimated.

However, without the news cash it will simply will be unable to do that; instead it will be forced to start dumping CRE exposure as it begins the inevitable pre-bankruptcy shrinking process.

Finally, should WeWork fail, it won't end there, as the market will then focus on the company that made this farce possible in the first place. “All eyes will be on SoftBank and how WeWork will proceed as they move away from Neumann.”