WeWork is on pace to run out of money by mid-2020, Bernstein says

WeWork is on pace to run out of money by mid-2020, Bernstein says thumbnail

wework adam neumann 3 4x3WeWork; Jackal Pan/Getty images; Samantha Lee/Business Insider

  • WeWork could run out of money as soon as next year if it keeps burning $700 million per quarter, according to analysts at Bernstein.
  • WeWork was counting on an influx of $9 billion from its IPO and a subsequent credit line. Now that the IPO is off, that money is off the table. 
  • To be cash flow positive operationally, WeWork needs $6 billion in incremental funding, according to Bernstein. If a recession hits in the next 3 years, it will need roughly $8 billion. 
  • Read more on Business Insider.

WeWork could run out of money as early as the second quarter of 2020 if it keeps burning cash at its current pace, according to analysts at Bernstein.

At the end of June 30, WeWork had $2.5 billion in cash. If they continue to burn cash at the current rate of $700 million per quarter, that would mean that the company would run out of money some time after the first quarter of 2020, analysts Chris Lane and Samuel Chen wrote in a recent client note.

Questions around WeWork’s cash burn come after the company’s Monday announcement that it would not be going forward with its planned initial public offering. The company was banking on raising $3 billion from its IPO, which would have triggered another $6 billion credit line after. Now, it might not get any of the money it was banking on, Bernstein says.

Without that influx of cash, the business may not survive much longer, according to Bernstein.

“Our existing forecasts shows the company is currently burning through $2.8 billion per year,” the analysts wrote. 

Read more: Morgan Stanley says WeWork’s failed IPO marks the end of an era for unprofitable unicorns — and explains why it leaves the market’s tech kingpins vulnerable

Given what existing cash and securities the company has on hand, this implies that they currently have enough funding to continue as usual “through mid Q2 of next year,” Bernstein said. 

WeWork needs a total of $6 billion in incremental funding “to see themselves to cashflow positive operations,” the analysts wrote. If a recession hits in the next three years, that number goes up to roughly $8 billion, the analysts said. 

While WeWork might be in jeopardy, it seems unlikely that the company’s investors would let it go under, Business Insider’s Troy Wolverton wrote. Now the company will have to rely on private investors for the money and is in early talks to raise capital, the Wall Street Journal reported, citing sources familiar with the discussions. 

Still, the new CEOs have their work cut out for them going forward, according to Bernstein. 

“The key question is whether the removal of Adam from daily operations and the reduction in his voting control will be sufficient to raise the money,” the analysts wrote. The new CEOs will “need to show that things have changed” and produce a new plan, they said. 

Read more: Dan Fuss is revered as ‘the Warren Buffett of bonds.’ He walked us through the investing approach that’s delivered market-beating returns and turbocharged his 61-year career.

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