2,400 employees to lose jobs as WeWork attempts to counter financial losses

American commercial real estate company, WeWork, had previously highlighted plans of laying off a massive number of employees in an attempt to reduce costs and push the business towards stability and profits. As of Thursday, the layoff has officially started in the United States of America. On a larger scale, as many as 2,400 employees are likely to lose their jobs across the globe.

The move highlights the same financial struggle that
had made WeWork to shelve its plan of initial public offering (IPO) back in
September. The office-sharing company was valued at $47 billion at the start of
2019. Owing to its rampant expansion in multiple markets without a defined strategy
for profitability, the business has now been pushed into a battle for survival.

SoftBank Pledged A $9.5 Billion Rescue Package To
WeWork In October

In the recent month, WeWork had accepted a rescue
package worth $9.5 billion from Softbank Group Corp, a well-known Japanese
technology investment company. The investment was aimed at improving the
prospects for WeWork to make more money and focus entirely on the core
business. Following the investment, the Japanese company now has 80% stake in
WeWork.

As of June 30^th, WeWork was reported to
have 12,500 employees in total. Including the ones working for affiliates, the
count was supposedly much larger than this. Representative from WeWork stated
on Thursday that the layoff had already started weeks ago in different
countries and debuts only in the United States this week.

Other noticeable changes in the American
office-sharing company include an imminent replacement of Artie Minson and
Sebastian Gunningham with a new CEO. The aforementioned executives have only
served the company in this capacity since September 2019. Under the control of
SoftBank, WeWork has recently announced Marcelo Claure as the newly appointed
Executive Chairman of the company as well.

The layoff hopes to regain investors’ confidence in
WeWork’s corporate governance, business model, and prospects for profits in the
upcoming months that may give life back to the plan of filing for an IPO with
the U.S Securities and Exchange Commission (SEC).

WeWork’s Junk Bond Dropped By 1.125 Cents Following
The Announcement

WeWork’s junk bond was reported
to have dropped by 1.125 cents following the announcement. Consequently, its
yield hiked to an all-time high of over 16%. On the other hand, the spread widened
by 0.36% and was noted at 14.46 points. Before WeWork’s attempt for an IPO
failed, the spread was lower than half of this. The bond is due in 2025.

Financial loss for WeWork was valued at $1.25 billion
in 2019’s third quarter. An ongoing investigation by the NY State Attorney
General is among the other complications that continue to weigh the business
down.