- WeWork revealed mushrooming losses and dwindling cash reserves Wednesday in a third-quarter earnings presentation reviewed by Business Insider.
- The coworking startup's net loss ballooned by more than 150% to $1.25 billion, and its available cash shrank by about 40% in three months to about $1.3 billion.
- The figures support SoftBank's decision to slash WeWork's valuation by more than 80% last quarter to below $5 billion.
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WeWork revealed mushrooming losses and dwindling cash reserves Wednesday in a third-quarter earnings presentation reviewed by Business Insider, supporting the investor SoftBank's decision to slash its valuation of the business by more than 80% to below $5 billion last quarter.
The coworking startup's revenue jumped 94% year on year to $934 million as it added a record 115,000 desks last quarter. A spike in expansion costs, however, meant its net loss ballooned by more than 150% to $1.25 billion. Moreover, its available cash shrank by about 40% in three months, from $2.2 billion at the end of June to about $1.3 billion (excluding restricted cash and pending commitments).
SoftBank Investment Advisors, which manages the Japanese conglomerate's $100 billion Vision Fund I, cut its valuation of WeWork to $4.9 billion last quarter from nearly $30 billion. WeWork's soaring losses and cash burn were undoubtedly major factors in the decision.
WeWork "knew the bulk of this and kept the public in the dark" about its mounting quarterly losses, Vicki Bryan, the CEO of the research company Bond Angle, told The New York Times.
The company ramped up spending this year ahead of its planned initial public offering, as it expected to raise at least $3 billion and unlock a further $6 billion in bank financing. But investors balked at its questionable business model, hefty losses, and limited governance as well as the controversial behavior of its cofounder and CEO Adam Neumann.
Faced with the prospect of going public at a fraction of the $47 billion private valuation it secured in January, and falling short of funding requirements, WeWork scrapped its IPO, and Neumann stepped down. Running short of cash, it reached a $9.5 billion rescue deal with SoftBank that gave the investor control of the company.