Following the emergence of reports about the ten-fold increase in losses at the UK subsidiaries of the embattled office space company WeWork touching £76m last year, the company’s co-founder Adam Neumann is no longer a multibillionaire.
It is estimated that as of March this year, the personal assets of Neumann was worth $4.1bn (£3.2bn) and was listed in the list of the world’s richest people by Forbes. Neumann was forced to relinquish the post of chief executive of WeWork after the debacle surrounding the failed attempt of the company to get publicly listed last month.
About $3.5bn off the personal worth of Neumann was struck down by Forbes on Thursday after the company failed to complete its attempt to make an initial public offering primarily because large institutional investors were concerned about the valuation of the company because of a lack of dependability on the future financial viability of business model of WeWork.
A sudden drop in the value of his 18% stake in the nine-year-old firm resulted in Neumann’s estimated net worth touching just $600m. At the time of the attempts by the company to get publicly listed, the estimated valuation of WeWork was about $47bn which had pitted the company as one of the most valuable privately held companies in the world. Before the proposed public listing of the company, shares and loans held by Neumann had been cashed out by him that amounted to about $700m as his personal worth.
However, the increasingly parlous state of the financial position of the company was displayed after the financial results of WeWork International, the UK parent company, was published on Friday.
The company had incurred a loss of £75.8m in 2018 compared to just £7.6m in 2017, the results showed. And despite the management fee income rising from £16.9m to £35.7m in last year by the UK operation of the company, this growth cost the company quite a bit of money.
There was a jump year-on-year in the administrative expenses of £84m to touch £109m. According to the company, this was because of “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”.
Between 2017 and 2018, the number of employees at the company was increased 198 to 440 as part of an aggressive expansion while the expenses of the company towards wages increased to £39m in 2018 from £20m in the previous year.
Claiming that the liquidity position of WeWork was “precarious”, the credit rating of the company was downgraded to CCC+ by ratings company Fitch last week. The total loss for the company last year was $1.9bn which was more than the revenues generated by the company which was at $1.8bn.
A number of cost reduction strategies are set to be implemented by the new co-chief executives of WeWork, Artie Minson and Sebastian Gunningham, which includes possible job loss of about 5000 employees which would mean one third of the total global employee strength of the company as well as divestment of the $60m Gulfstream jet business of the company.
(Adapted from TheGuardian.com)