By Samantha Delouya, CNN
(CNN) — The future of WeWork is uncertain, according to the company.
“Substantial doubt exists” about WeWork’s ability to continue to stay in business, due to the company’s losses, projected cash needs, and increased member turnover, according to the company’s second quarter earnings release.
WeWork management outlined a plan to improve the company’s financial health, saying that its ability to stay in business is “contingent upon successful execution” over the next 12 months.
WeWork, which operates coworking spaces, said it will try to lower rent costs by negotiating more favorable lease terms and increasing revenue by reducing canceled memberships as part of its turnaround plan. The company will also attempt to raise more money by issuing debt or equity securities.
In the second quarter, the company reported a net loss of $397 million, an improvement compared to its net loss of $635 million in the second quarter last year.
“Excess supply in commercial real estate, increasing competition in flexible space and macroeconomic volatility drove higher member churn and softer demand than we anticipated, resulting in a slight decline in memberships,” the company’s interim CEO, David Tolley, said in a statement.
The company’s stock plunged more than 20% in after-hours trading on Tuesday. Overall, WeWork’s stock is down 85% since the start of this year.
WeWork’s precarious future comes amid a difficult time for the commercial real estate sector. Office and retail property valuations have plummeted since the pandemic made way for a rise in hybrid working. Rising interest rates have also damaged the credit-dependent industry.
WeWork was valued at $47 billion at its peak, but it struggled to fully recover after a failed attempt to go public in 2019. At the time, IPO paperwork revealed larger-than-expected losses and potential conflicts of interest with the company’s founder and then-CEO Adam Neumann. The company eventually went public 2 years later at a valuation of about $9 billion, but it has continued to burn through cash and struggle to retain members, who pay to rent desks at WeWork’s office spaces.
In May, a shakeup in the WeWork’s C-suite came as a surprise: The company’s chairman and chief executive officer, Sandeep Mathrani, stepped down from the role to take a position at private equity firm Sycamore Partners. Tolley, a WeWork board member, has served as interim CEO since then.
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