The WeWork Company is still losing more money than it makes, relying on its combat chest of investment capital as it burns billions each year. The annual losses of WeWork company reached $1.93B in 2018, double of its number from the past year which was reported in the financial report given to its investors in its bond debt. Its revenue more than doubled from 2017 to last year, when the coworking space company drew in $1.82B.
The reason for WeWork’s losses appeared as no shock to anyone that has accompanied the company in the past few years: ever-increasing expenditures to lease and build out its shared workspaces. WeWork officials have also told investors that once its spaces are online, they will make more money than they cost to operate. Another major expenditure is the moneymaking potential of the company’s acquisitions of tech companies. WeWork going into losses might be good news for WeWork Competitors but it is not that simple.
Another drain is the extensive interest payments WeWork has acquired from debt investments like the bond offerings. SoftBank, which has been WeWork’s largest investor through its Vision Fund, has been drawing both equity and debt into the company.
In its most recent infusion it represented more modest plans while perhaps at the direction of SoftBank’s backers, it could also mean less demanding interest payments in the long run.
The WeWork’s company revenue growth beat any particular quarter from the year previously, and the portion of its business that comes from larger companies has grown to one-third of its total office leasing. But its occupancy dropped from 84% to 80% from the third to the fourth quarter last year, and per-member revenue has dropped to13.5% since 2016.
WeWork administration chalked up the occupancy drop to the high number of openings across its portfolio in 2018, saying that each of its coworking locations takes about 18 months to fill once it opens. The per-member drop in revenue was apparently due to openings in new markets that could not justify membership rates of its strongholds in New York and San Francisco.
Even though it’s rebranding as the We Company indicated its commitment to being a multifaceted company with many revenue streams, office memberships, and services (like its Powered by We office design platform) accounted for 93% of its revenue in 2018. That could increase concerns that WeWork would be exposed to office contraction in the event of a downturn, particularly considering it has been built on short-term, easily canceled leases. Apart from coworking spaces, WeWork also has products like WeWork Labs which are incubators for startups.