WeWork reassures investors it has enough cash to weather coronavirus

WeWork Executive Chairman Marcelo Claure through an job interview with Andrew Ross Sorkin at WeWork headquarters in New York Town on February 10, 2020.

David A. Grogan | CNBC

WeWork is telling buyers it has enough dollars on hand to execute its lengthy-expression programs and temperature the in close proximity to-expression challenges posed by COVID-19. 

In a 7-slide deck for buyers, WeWork stated it experienced $four.four billion in dollars and dollars equivalents as of the conclude of 2019. The enterprise is expected to launch total-yr monetary outcomes right after the industry closes on Thursday. 

In a letter acquired by CNBC, WeWork’s govt chairman, Marcelo Claure, and CEO, Sandeep Mathrani, say that the enterprise “has a strategic plan and a sound monetary posture.”

WeWork is the second SoftBank-backed enterprise to reassure buyers that its dollars posture will get it via an more and more unsure and risky yr. 

Very last 7 days, Uber instructed buyers that it experienced enough dollars and dollars equivalents on its balance sheet to temperature the affect of COVID-19 as ridesharing quantities plunge. 

But Uber experienced $eleven.four billion in dollars and small expression investments as of the conclude of 2019. CEO Dara Khosrowshahi stated that in a worst-situation circumstance, it would nevertheless have accessibility to $four billion, such as a $2 billion line of credit score. 

WeWork’s dollars posture at the conclude of 2019, at $four.four billion, is considerably less than 50 percent of what Uber experienced on hand.

The enterprise also carries on to bleed dollars, reporting $one.25 billion in losses in the 3rd quarter of 2019 by itself, a sharp improve from the exact period a yr previously.

In addition, WeWork could face a pricey board fight with SoftBank just as the enterprise navigates new challenges amid the COVID-19 outbreak. 

CNBC formerly described that SoftBank is backing absent from a $3 billion tender supply, element of its rescue plan place in location right after WeWork’s unsuccessful try to go general public in 2019. WeWork notes in its letter that the tender supply, less than which SoftBank would have acquired shares from present shareholders, would not give further liquidity to the enterprise in any case.

Problems about WeWork’s monetary posture have been developing given that previous yr, right after founder and CEO Adam Neumann stepped down amid company governance missteps and the startup’s valuation fell from $forty seven billion to $7.8 billion. 

In a international downturn, WeWork’s business enterprise design of leasing small-expression business house, even though holding for a longer time-expression leases, is notably vulnerable.

Very last yr, Boston Federal Reserve Financial institution President Eric Rosengren raised fears about the coworking business enterprise design, saying that their rise may be a resource of monetary instability that could make the subsequent U.S. recession worse by sparking a operate on business genuine estate.  

WeWork grew to become the major tenant in “adaptable business” house in 2019, according to genuine-estate brokerage company CBRE.

As of Thursday early morning, WeWork’s a few Wuhan, China, places and all spaces in India remained shut even though all North American places are open up.