A first-quarter net loss of $2.06 billion was reported by the office-sharing startup WeWork m backed by Japan’s investment firm SoftBank, on Thursday. The loss was because of hits of restructuring costs, the company said as it prepares to get listed through a merger with a blank-check firm.
The easing of restrictions imposed throughout the world to curb the spread of Covid-19 infection resulted in more people returning to offices which is causing a recovery in its business, WeWork said. The company was severely hit last year because of reducing occupancy and increasing operating costs as people were forced to stay back and work from home.
The company said that in the first quarter, there was a 50 per cent growth in total occupancy compared to 47 per cent growth in the metric in the fourth quarter of last year.
In March this year, WeWork decide to get listed at the stock market through a merger with a special purpose acquisition company BowX Acquisition Corp. The deal valued the office sharing startup at $9 billion. After the merger, it would retain a majority stake in the company, SoftBank Group Corp said.
The company’s previous efforts to make a stock market debut in 2019 through an initial public offering had spectacularly imploded because of concerns of investors about the business mode of the company as well because of the management style of the company’s co-founder Adam Neumann.
WeWork said that its revenues for the first quarter also dropped by almost 50 per cent to $598 million compared to the same period a year ago.
In the first quarter, there were 490,000 members compared to 693,000 in March 2020, WeWork said.
During the quarter, the company was hit by $494 million in restructuring costs which was primarily because of non-cash SoftBank stock purchases and a settlement with Neumann, the company said. An impairment charge of $299 million was also reported by the company partially because of its exit from some of the real estate it owned.
In February, a settlement was reached between SoftBank and Neumann, the former chief executive officer of the office space renting startup which ended a legal battle between the two parties which had started in 2019. In that settlement, SoftBank agreed to purchase about $3 billion worth of stocks of WeWork that was owned by Neumann and other employees. However the obligation to purchase the shares was later contested.
(Adapted from Nasdaq.com)