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Surviving the IPO fiasco and a pandemic: WeWork management opens up

Updated : October 29, 2020 07:07 PM IST

When WeWork withdrew its much-anticipated $47-billion IPO in September 2019, it saw valuations plummet to less than $8 billion on concerns over an erratic management and mounting losses.

The firm has since undergone an enormous management shake-up and its new team has emphasised the focus on putting the wheels of this once-promising company back on the track amidst a global pandemic.

According to its second quarter earnings, WeWork saw a 9 percent increase in revenue to 882 million dollars (YoY). It halved the burn rate and expects to be cash flow positive by 2021.

Enterprise companies now represent 48 percent of its over 6 lakh memberships and accounted for more than half of WeWork's core sales for the first time in Q2 2020.

So while the company is confident of a recovery, the street is not convinced yet -- rating agency Fitch downgraded the co-working giant's rating regarding its ability to pay long-term debt to CCC - indicating 'substantial credit risk' where 'default is a real possibility'.

In a scenario where demand is structurally lower, Fitch sees WeWork as potentially requiring additional liquidity, which could include and go beyond the financing commitment by SoftBank.

A better-case scenario by Fitch estimates WeWork's cash burn rate at about $900 million in 2021 and a "moderately positive free cash flow" level in 2022.

So the question is how to do you sell shared space at a time when people are still hesitant to return to the office? And what does the does the road to profitability look like for WeWork?

On CNBC-TV18’s Young Turks, India’s longest-running show on startups and entrepreneurship, Shereen Bhan spoke to Sandeep Mathrani, CEO of WeWork Global and the man steering one of the company's biggest markets, Karan Virwani, CEO of WeWork India.

Watch video for the full interview.
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