Rapid expansion comes at major cost
WeWork said its losses nearly doubled to $1.93 billion last year, while revenues reached $1.82 billion. Unsurprisingly, the co-working company generated 93% of its total revenue from membership fees and services.
Mixed Signs: Although the startup now boasts 401,000 members, revenue per member fell for the third consecutive year to $6,360, which is down 13.5% from the start of 2016. Moreover, occupancy rates fell from 84% at the end of last year to 80% in the third quarter, according to the WSJ. WeWork attributes these declines to new locations in lower-cost markets and an increased rate of expansion.
Tracking the expenses: $372 million for sales and marketing, and $237 million in interest payments related to its 2018 bond issuance. The company is sitting on north of $6.6 billion in cash and cash commitments.
IPO Watch: Lyft filed for an IPO earlier this month in hopes the market will focus on its revenue growth instead of mounting losses. Although WeWork aspires to follow in that path, they have a long way to go – Lyft’s revenue was double its losses in 2018, according to CNBC.
Bond Watch: On the heels of this news, WeWork’s bonds slid to 91 cents on the dollar, according to the Financial Times. The drop pushed the yield to 9.8 percent.The co-working behemoth borrowed $702 million in a bond sale last April.
Context: After Softbank lowered its new investment to $2 billion in January, the bonds hit an all-time low of 86 cents on the dollar. Don’t expect an IPO any time soon.