It has become a penny stock as its cash burn jumps.
IWG, the parent company of Regus, could benefit.
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WeWork (NYSE: WE) stock price has crashed to a record low as concerns about the company continue. It has become a penny stock valued at $805 million, which is much lower than its all-time high of over $45 billion. IWG (LON: IWG) share price, on the other hand, dropped to 147p, 68% below its all-time high, giving it a market cap of over $1.7 billion.
IWG vs WeWork share prices chart
WeWork has had one of the biggest fall from grace in the world. At its peak, the company was valued for more than $45 billion, bigger than the IWG, previously known as Regus. The two companies provide flexible workspaces to individuals and companies.
WeWork’s business is doing relatively well. Results published this month showed that its revenue jumped by 11% to $849 million. This revenue growth was helped by both user growth and a stronger euro and pound. It also expects that its revenue will be between $840 million and $865 million
While WeWork’s business is doing well, it is also a cash incinerator. The company burned millions of dollars, thanks to payment of annual bonuses and interest payouts. Its cash and short-term investments dropped from over $287 million in December 2022 to $224 million.
At the same time, its account payable jumped from over $393 million to over $495 million while its long-term debt jumped from $3.2 billion to more than $3.57 billion.
Therefore, if this trend continues, there is a likelihood that the company will run out of cash unless something happens. Worse, Softbank has already provided what I believe is the last lifeline to the company.
IWG is the biggest competitor to WeWork. It has many years in the industry since Regus was started in 1989. The company also has locations in key markets and relationships with some of the biggest companies in the world.
Most importantly, IWG is in a better financial footing than Regus. Its cash and short-term investments have jumped from $105 million to over $194 million. At the same time, its total debt is less than $1 billion. The most recent results showed that IWG’s revenue rose by 25% in Q1 to £765 million.
In addition to the likely collapse of WeWork, the company could benefit from the current macroeconomic environment. For example, many companies are embracing hybrid working model. Also, the collapse of commercial real estate gives the company a good opportunity to renegotiate its contracts.
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