Startup company WeWork is on the cusp of default after failing to meet interest payments due on five of its bonds, totaling roughly $95 million.

On Monday, it claimed it had enough liquidity to make the payments and may do so during the 30-day grace period that has now commenced. Nevertheless, its stocks took a dive Tuesday morning, plummeting by more than 20 percent.




However, it wants to preserve cash and attempt to negotiate with creditors. It intends for its missed payments to jump-start negotiations with lenders. It also aims to raise money by issuing debt or equity securities.

In August, WeWork said it was in the process of renegotiating almost all of its real estate leases with landlords. It also stated there was “substantial doubt” it could meet all its operations costs. In response, its shares dropped by more than 25 percent.

At that time, WeWork reported it had $205 million in cash at the end of June. However, it had reported a net loss of $696 million in the first six months of 2023. In March, WeWork announced it was undergoing a restructuring that canceled or equitized roughly $1.5 billion of debt and extended roughly $1.6 billion in remaining debt maturities to August 2027.

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WeWork is a publicly traded company that provides temporary “coworking” spaces, both physical and virtual. Coworking is a model of office arrangement where multiple companies can share the same open floor plan to save on rent and other costs. It is considered ideal for startups that want to work in collaboration with each other but don’t want high overhead costs and don’t want to sign multiple-year leases with realtors.

It is a difficult time for commercial real estate more generally, as the pandemic and subsequent work-from-home policies have caused property values to plummet in cities. The Federal Reserve’s attempts to manage the money supply by raising interest rates has also landed blows on the industry as it relies on borrowing.

WeWork has a history of falling apart. In 2019, New York Times described a three-month period of WeWork’s existence as “an implosion unlike any other in the history of start-ups.” It went from a $47 billion valuation to $7 billion, and had to be rescued by Japanese giant SoftBank. Co-founder Adam Neumann walked away with $1 billion from share sales and a $185 million consulting fee.

Startup company WeWork is on the cusp of default after failing to meet interest payments due on five of its bonds, totaling roughly $95 million.
In this Jan. 16, 2018 file photo, Adam Neumann, center, co-founder and CEO of WeWork, attends the opening bell ceremony at Nasdaq in New York. (AP Photo/Mark Lennihan)

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