The WeWork co-founder Adam Neumann has been stripped of his multibillionaire status as it has emerged that losses at the UK subsidiaries of the embattled office space company soared tenfold to £76m last year.
Neumann, who last month stepped down as chief executive of WeWork following its botched bid to list on the US stock market, was estimated to be worth $4.1bn (£3.2bn) in March when he appeared on Forbes’ list of the world’s richest people.
On Thursday, Forbes slashed $3.5bn off that estimate following the failed attempt to complete an initial public offering amid mounting concerns over the financial viability of the WeWork business.
Neumann’s estimated net worth has dropped to $600m due to the sudden decline in the value of his 18% stake in the nine-year-old firm. The business had been estimated to be worth some $47bn when the intended float was first unveiled, making it one of the world’s most valuable private companies. Neumann had cashed out $700m for himself, from share sales and loans, ahead of its proposed float.
The latest financial results of WeWork International, the UK parent company, published on Friday, provide fresh insight into the increasingly parlous state of its financial position.
Last year, WeWork International’s losses ballooned to £75.8m, from £7.6m in 2017. The UK operation managed to double its management fee income, from £16.9m to £35.7m; however, this came at a significant cost to the business.
Administrative expenses jumped by £84m year-on-year to £109m, which the company said included “an increase of £46.6m in expenses paid by the company to its ultimate parent in connection with the use of intellectual property and other support services”.
As part of an aggressive expansion, staff numbers more than doubled from 198 to 440 between 2017 and 2018, and the company’s wage bill rose from £20m to £39m year-on-year.
The amount of debt WeWork must repay within the next five years almost tripled from £110m to £300m. The UK company has £15m in cash on its books.
It also emerged on Friday that WeWork’s bankers must complete a new debt financing package by the end of November because the costs of the failed IPO has led to it burning through cash reserves faster than expected, according to the FT (£).
The company had expected to raise $3bn to $4bn from issuing new shares at flotation, and had a new $6bn loan package lined up subject to successfully listing on the stock market.
Last week, the ratings company Fitch downgraded WeWork’s credit rating to CCC+, warning that its liquidity position is “precarious”. The global company lost about $1.9bn last year – more than its revenues of $1.8bn.
WeWork’s new co-chief executives, Artie Minson and Sebastian Gunningham, are looking at cost-saving cuts that could mean the loss of about 5,000 jobs, a third of the company’s global workforce, and are selling the company’s $60m Gulfstream jet.
The company is also shutting down its WeGrow school in New York, which charges fees of up to $42,000 a year, at the end of this school year. The elementary school, run by Adam Neumann’s wife, Rebekah, had a mission “to unleash every human’s superpowers”. WeWork said the shutdown was “part of the company’s efforts to focus on its core business”. The closure was first reported by The Huffington Post.
