WeWork gets new US$1.1b commitment from SoftBank, cuts burn rate

[NEW YORK] The owner of money-losing shared office provider WeWork told employees on Thursday it has slashed its cash burn rate almost in half from the end of last year and obtained a US$1.1 billion commitment in new financing from majority owner SoftBank Group Corp.

The company said in an e-mail to employees that its second-quarter results show the coronavirus pandemic has hurt business but its financial position remains strong.

"Our early efforts to become a more streamlined, cash-conscious organisation puts us in a better position to adapt quickly, navigate new realities and deliver our future business objectives," said Kimberly Ross, chief financial officer of WeWork, in the e-mail seen by Reuters.

Revenue in the quarter reached US$882 million, a 9 per cent increase from a year earlier, Ms Ross said. WeWork in the first quarter reported revenue of US$1.1 billion, the first time it had exceeded nine figures, and its cash burn was US$482 million.

WeWork has US$4.1 billion in cash and unfunded cash commitments, including the US$1.1 billion in new financing, Ms Ross said. WeWork in July indicated it expected to be cash flow positive in 2021, according to the Financial Times.

The US$1.1 billion is the last of the debt facilities included in a wide-ranging transaction announced in October 2019, a source at SoftBank said.

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WeWork ended the quarter with 612,000 members, a decline from 693,000 in the prior quarter. But 48 per cent were from prized "Enterprise" customers, businesses with 500 employees or more.

The results were released almost a year to the day after it filed plans to go public, when the company was valued at US$47 billion and looked poised to be one of the year's hottest IPOs.

WeWork soon entered a tailspin as revelations of corporate mismanagement emerged. The company has since undergone an enormous management shake-up and remains enmeshed in lawsuits over a US$3 billion tender offer to existing shareholders.

REUTERS