- WeWork cash flow is dwindling, and it plans to shutter more sites as it struggles to bounce back.
- Its market capitalization now stands lower than Regus, another flexible office space provider.
- This is a sign the market is rewarding careful management over rapid growth.
WeWork had once touted itself as the future of real estate.
Now WeWork faces a cash crunch as it struggles with increasing net losses and expensive long-term leases, watching as its market cap plunged from $2.3B at the start of December to $1.35 billion at the end of trading on Wednesday.
WeWork’s problems stood in sharp contrast to another company that offered flexible workspaces for decades before WeWork entered the market: Regus.
The company now has a market cap of $2 billion at the end of trading on Wednesday, after being forced to win through articles like “How did WeWork beat Regus?” in 2019.
Under Adam Neumann, WeWork expanded rapidly before investors eventually grew concerned over the growth strategy. After Neumann’s ouster, WeWork struggled to right-size its ambitions to reality.
The company had negative cash flow of $4.3 billion from July to September this year, per The Wall Street Journal. WeWork was able to borrow from its biggest investor Softbank to keep afloat, though it has burned through more than $10 billion from the bank to date. WeWork said it would end the year with $300 million cash, less than one-third of what it held at the end of 2021.
Regus, owned by IWG Group, faced many of the same headwinds as WeWork. Yet its parent company has still outperformed WeWork since WeWork began publicly trading.
To be clear, Regus is facing his own struggles. Like almost all office space operators, Regus has been crushed by the pandemic, with a net loss of $254 million on $2.7 billion in revenue in 2021. But compare that to WeWork, which lost $4.4 billion on $2.7 billion in revenue in 2021, pulling of the dubious feat of having operating expenses nearly double its revenue.
Regus was always more professional and utilitarian take on co-working spaces, while WeWork banked on a more casual approach to a workspace to attract customers. With Regus, you got a coffee maker. With WeWork, you got kombucha on tap.
In a sign IWG and Regus got something right, Reuters reported IWG bought several former WeWork locations in London and New York in 2021 as part of a spate of new co-working spaces the company opened to meet flexible office demands.
Meanwhile, WeWork plans to shutter some of its sites to control its spending and faces the real possibility of defaulting on its debt.
Regus has a long climb in front of it in a world where the future of the office is murky. But right now, its focus on fundamentals and not chasing growth at all costs means the market values it more than WeWork.
Correction: December 15, 2022 — An earlier version of this article did not reflect the number of WeWork users. The number of users is increasing, not declining.