It can be argued that WeWork has expanded too quickly for its own good. Instead of incremental, healthy growth, the company has made a concerted effort to expand its operations as speedily as possible, despite hits to its profits. The result is a quadrupling in the number of locations in the last three years, as well as a dismal bottom line.
Is WeWork A Profitable Business?
WeWork is not profitable, and it is on the hook for leases that were taken out at record-high rent prices. So far, the continually growing stock market has helped the corporation pave over some of its more glaring issues. However, what will happen to WeWork during the next recession?
When people start believing that they might lose their income streams at some point, they start tightening their belts. In these cases, at a few hundred dollars a month, a WeWork office membership can be one of the first luxuries to go. The kitchen table or the local Starbucks cafe is not as comfortable as a WeWork location that comes with unlimited coffee and beer, but working from home is not the end of the world, either.
Should the United States economy enter into a recession in 2020 or 2021, it is not clear how WeWork expects to remain solvent. The company’s poor prospects have not gone unnoticed by analysts.
A Failed IPO
In one of 2019’s biggest busts, WeWork’s IPO was shelved after investors got a chance to review the company’s potential. A $47 billion valuation started to seem absurd, given that the company was hemorrhaging money and had no clear path to profitability. The result is that WeWork went from being the Street’s next hottest company to considering laying off thousands of workers and reducing its overhead costs.
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