NEW YORK (Reuters) – WeWork has opened up an almost equally large number of locations over the past 3-1/2 months in the first six months of this year, is likely to accelerate the rate at which the office is part of the company is burning through cash, still a hard-nosed investors to examine the outlook for the general public.
FILE PHOTO: WeWork’s logo is displayed outside of a co-working space in New York City, New York, New York, USA on January 8, 2019. REUTERS/Brendan McDermid/File Photo
According to a Reuters analysis of the information available on the website of the company, WeWork was founded in 622 sites will open in 123 cities and towns on Oct. 10. That is, it compares it with the footprint of 528 sites in 111 cities and towns on 30 June which was set forth in the prospectus, to the left of the IPO of the company.
The website also shows that 89 of the sites as “coming soon” and the 117 sites as a “just announced” all-new venues that are not open to it.
A total of WeWork, said on its website that it is the will of 845 branches in 125 cities and towns, but it is not clear whether all of that is still open. A WeWork spokesperson declined to comment on the plan.
The increase in the rate of new office openings will be added to the risk for WeWork, a company that has created a global brand name for the shared workspace concept, but was forced to stop, the plan is to go to the public Sept. 30 because of investors ‘ concerns about how it is measured and whether or not it’s business model is sustainable.
The company is now having to cut back, such as the dismissal of some employees and the closure or sale of the entities which are not essential to its core business as it tries to avoid the money. On Friday, WeWork said it will close its WeGrow private school in New York City, in the pares and peripheral activities.
Of the 97 new locations, WeWork will be added in the first half of this year with an average cost of $2.63 million in the design and construction costs, or an increase of 38% from $1.91 million of which 82 have openings costs in the first half of 2018, according to the IPO document. It added 94 new sites from the beginning of July and October. 10, according to its web site.
The average size of a new site in the latest outbreak of the holes is similar to that in the first half of this year remains to be seen. A WeWork spokesperson declined to comment.
“Investors do not want to invest in a company with a high cash-burn rate,” said Gina Szymanski, a portfolio manager for a real estate-focused, AEW Capital Management, LP in Boston, massachusetts. “They have managed to slow their growth down and focus a little more on the profits.”
IS BLEEDING CASH
WeWork has only about $2.5 billion of cash and cash equivalents as at 30 June in accordance with the prospectus, which will be published in the month of August.
The money is made in the second quarter of last year, the company and the current job does not change, according to research by AllianceBernstein. Some of the reports in the media in the past few days and said it may run out of money before the end of the year, with a new line.
As well as the significant costs of opening new offices, WeWork’s current activities are also the major loss-makers. In the year to June 30, expenses were $2.9 billion, with an annual turnover of only $1.54 billion.
IFR reported, banking sources said on Friday that WeWork is in talks with JPMorgan Chase bank to seek $1.75 billion in the bank, for the financing of the project is that it has enough liquidity to see it through the end of the year. The Chase is in talks with other banks in the consortium, the letter of credit, it said.
In addition, WeWork is in agreement with the banks for the issuance of $3.25 billion in secured and unsecured debt securities, warrants, IFR added.
WeWork will be involved in the negotiations this week, with its second-largest shareholder, Softbank Group, Corp., a new $1 billion investment to help the company through a major restructuring, according to sources familiar with the discussions.
WeWork has certainly slowed down the new lease, in response to investor feedback, according to Szymanski, with an indication of AEW in the analysis of WeWork’s presence in the market.
The leases are for a lot of of your recently visited sites that would most likely have to be signed before August, and that was when the company first became a punching bag for investors, and financial analysts critical of the way they are measured and managed.
WeWork owner, the Company said in the IPO document, is that it reduces the cost due to the sophistication of the design and construction processes, including the investment in new technology in order to help WeWork is fast and efficient development of an area. With the new technology, however, is not defined, and the company declined to comment.
Reporting by Herbert Lash; Additional reporting by Carrie Monahan in New York; Editing by Martin Howell and Daniel Wallis