Would WeWork’s implosion pose a systemic risk?

EARLIER THIS month WeWork delayed its initial public offering (IPO) after it became clear that the co-working firm would fetch as little as one-fifth of its latest private valuation of $47bn. Prospective investors began to question its poor governance, lack of transparency, reckless expansion and lack of economies of scale. The company, which has lost $1.4bn in the first half of this year, desperately needs cash. Public markets, creditors and venture capitalists, whom WeWork’s dreamy co-founder, Adam Neumann, has infatuated for years, appeared unwilling to hand over any more unless something changed. This week something did: Mr Neumann agreed to step down as chief executive. Will this be enough to avert WeWork’s slide towards possible bankruptcy? And would its implosion have consequences, other than to leave its backers out of pocket?

Start with WeWork’s prospects. The company has around $2.5bn in cash—about as much as its combined loss in 2017-18. If it continued to burn through this pile at the current, even faster rate, it would run out of money in under a year. The resignation of Mr Neumann, whose name appears 169 times in the company’s IPO prospectus, may be intended to signal a shift away from his quest for growth at all costs towards more responsible stewardship of capital. If that results in smaller losses, investors may...



via Business Feeds

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