In a stark reflection of WeWork Inc.’s current financial challenges, the company’s corporate bonds have taken a severe hit in the market.
The hourly office-rental giant issued a cautionary statement regarding its solvency, leading to a sharp decline in bond prices, far surpassing the dip in its stock value.
The 7.875% notes due on May 1, 2025, with a total value of approximately $165 million, experienced a precipitous drop in value, trading at around 12.55 cents on the dollar.
This represents a staggering 63% decline from their previous value of 34.13 cents on the dollar. The decline is illustrated in a chart provided by BondCliQ Media Services.
The bond-market turmoil hasn’t spared WeWork’s equity either.
The company’s stock price, trading under the ticker symbol WE, plummeted by about 40% to reach 12.6 cents a share. This significant decrease follows WeWork’s admission of substantial doubts about its ongoing viability.
Survival plan
WeWork’s survival now hinges on successfully executing a plan aimed at enhancing liquidity and profitability over the next year. The company’s stock has languished below $1 per share since February.
Despite narrowing its second-quarter loss to $397 million, or 21 cents a share, WeWork remains under pressure.
While revenue increased to $844 million, up from $815 million during the same period, the company’s financial performance fell short of analyst estimates.
The market reaction is evidenced by WeWork’s bonds, which have faced ten consecutive days of decline leading up to the company’s quarterly update. This decline has signaled to investors that the market sentiment around WeWork’s financial prospects has grown increasingly negative.
Ongoing struggle
The situation underscores WeWork’s ongoing financial struggles, as the company has been grappling with overdue payments, accumulating 402 late-paid bills, with a total of $799,000 in late bills.
These financial issues have prompted concern among investors and analysts, who are questioning the company’s long-term viability.
While equity investors bear the brunt of a company’s failure, bondholders typically retain a portion of their principal even in a bankruptcy scenario.
WeWork’s predicament serves as a cautionary tale, raising questions not only about the flexible office space market but also about the company’s internal management and growth strategies.
