Flexible office space provider WeWork has had its share of financial troubles over the last year, but the company expects to be profitable in 2021. The forecasted turnaround has led WeWork Chief Executive Officer Sandeep Mathrani to revisit plans for another Initial Public Offering (IPO), Bloomberg reports.
WeWork has taken multiple steps to regain in its financial footing, including renegotiating leases, staff layoffs and hiring new management after SoftBank Group Corp. took control of the company. Mathrani recently told reporters in India that WeWork’s business was bouncing back, “100%” in Asian markets such as China, South Korea and Singapore.
“I’m a big believer in one step at a time so let’s hit profitable growth first, and we’ll then revisit the IPO plan,” Mathrani said during video conference call. “Nazar na lag jaye,”—a Hindi expression meaning Mathrani didn’t want an evil eye cast on the company’s turnaround strategy.
Mathrani explained that all of WeWork’s offices and franchises would be rolled into the parent company, per existing agreements. The flexible office space provider’s valuation has dropped more than 90% since its apex of $47 billion. Mathrani replaced WeWork co-founder and former CEO Adam Neumann who stepped down last September amid pressure from investors and board members after the company’s first IPO attempt fell through.
WeWork’s confident about profitability despite outside doubters
Fitch Ratings recently dropped WeWork’s credit rating and warned the company could default on its obligations, according to Bloomberg. However, Mathrani said WeWork is on track to be profitable and produce free cash flow by next year. He also noted that the company was finished with “rightsizing” after it laid off more than 8,000 employees, which created $1 billion in annual savings. The chief executive said the company was about 75% through reviewing its global locations.
“In Q1, we were at 66% occupancy; with the cost cuts that would be where we see cash coming in,” Mathrani said during the conference call. “We will get to that level by next year.”
Mathrani also acknowledged the billions of dollars SoftBank provided are still in WeWork’s “war chest.” The executive said he still speaks with Neumann, who still owns a significant stake in WeWork, often. He noted that WeWork doesn’t owe Neumann any more money from the $185 million consulting deal he struck with SoftBank after he stepped down as CEO.
“We chitchat twice a month and the conversation is about the business,” Mathrani said. “He wants to know what I’m doing. (Talking to Neumann) helps crystallize my own thought process.”
Joe Dyton can be reached at firstname.lastname@example.org.