Embattled workspace sharing company WeWork has received a new commitment from Japanese multinational conglomerate SoftBank.
WeWork recently got a $1.1 billion commitment from SoftBank Group Corporation (OTC: SFTBF). Following this, WeWork told employees that the company had slashed its burn rate by almost 50% from the end of 2019. Referring to the second-quarter earnings result, WeWork revealed how the persisting pandemic has affected business in an email to employees. However, the company is confident that its financial position is secure.
In the email, the chief financial officer of WeWork Kimberly Ross said:
“Our early efforts to become a more streamlined, cash-conscious organization puts us in a better position to adapt quickly, navigate new realities and deliver our future business objectives.”
WeWork Commented on $1.1 Billion Commitment from SoftBank
WeWork’s chief financial officer commented on the recent SoftBank commitment. Ross admits that though the company may not use the funds soon, it is still necessary to have it for future use. Presently, WeWork has $4.1 billion in cash and unfunded cash commitments. The commitments include $1.1 billion from SoftBank. As of the end of March, the company had $3.9 billion in cash.
Earlier, WeWork planned to hold a conference call for select participants to discuss the company’s Q2 financial report for 2020. According to a Reuters report, revenue in the quarter reached $882 million, a 9% year-over-year gain. Also, WeWork reported 612,000 members, a 12% decrease from Q1’s 693,000. Ross wrote:
“Though revenue is down from [the first quarter] due to Covid-19-related business disruptions, our overall financial foundation as well as our sales pipeline continues to grow stronger.”
In the first quarter, WeWork hit a revenue gain of $1.1 billion. This marked the first time the company surpassed nine figures. In the same quarter, WeWork’s cash burn was $482 million. According to the email sent to staff, the company burnt through $671 million between April and June. This is almost a 40% increase from Q1, including $116 million in reconstructed costs.
Also, in the first quarter, WeWork reported an increase in its building count by 89 locations. However, at the end of Q2, the company ended the quarter with 843 locations. This is an addition of only 15 buildings.
Previous Investments in WeWork
A while ago, WeWork experienced troubles that resulted in the abandonment of its IPO plan. Also, the challenges nearly led WeWork to bankruptcy and caused the departure of CEO Adam Neumann. To help with the challenges, SoftBank stepped in with an investment of $18.5 billion into the company. The American workspace provider’s new financing is another sign of SoftBank’s support for WeWork. Before then, SoftBank had invested over $10 billion in WeWork.
WeWork is yet to have access to the latest SoftBank financing, which is structured as senior secured debt.
Presently closed at $60.62, SoftBank stock has surged over 29% in the last twelve months. Also, the company gained 40.18% in its year-to-date performance and over 43.5% in the last three months.