WeWork; Jackal Pan/Getty images; Samantha Lee/Business Expert
- WeWork could run out of cash as quickly as next year if it keeps burning $700 million per quarter, according to analysts at Bernstein.
- WeWork was depending on an influx of $9 billion from its IPO and a subsequent credit line. Now that the IPO is off, that cash is off the table.
- To be cash flow positive operationally, WeWork needs $6 billion in incremental funding, according to Bernstein. If a recession hits in the next 3 years, it will require approximately $8 billion.
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WeWork could lack money as early as the second quarter of 2020 if it keeps burning money at its current pace, according to analysts at Bernstein.
At the end of June 30, WeWork had $2.5 billion in cash. If they continue to burn cash at the existing rate of $700 million per quarter, that would indicate that the company would lack cash a long time after the very first quarter of 2020, experts Chris Lane and Samuel Chen wrote in a current customer note.
Questions around WeWork’s cash burn come after the company’s Monday statement that it would not be moving forward with its organized going public. The business was relying on raising $3 billion from its IPO, which would have triggered another $ 6 billion credit limit after Now, it might not get any of the cash it was counting on, Bernstein says.
Without that influx of money, business may not endure a lot longer, according to Bernstein.
” Our existing projections reveals the business is presently burning through $2.8 billion annually,” the experts composed.
Offered what existing money and securities the company has on hand, this implies that they presently have enough financing to continue as normal “through mid Q2 of next year,” Bernstein said.
WeWork needs a total of $6 billion in incremental funding “to see themselves to cashflow positive operations,” the analysts composed. If an economic crisis strikes in the next three years, that number goes up to roughly $8 billion, the analysts said..
While WeWork may be in jeopardy, it appears not likely that the company’s investors would let it go under, Business Insider’s Troy Wolverton composed. Now the business will have to rely on personal investors for the cash and remains in early talk with raise capital, the Wall Street Journal reported, mentioning sources acquainted with the discussions.
Still, the brand-new CEOs have their work cut out for them moving forward, according to Bernstein.
” The essential concern is whether the elimination of Adam from daily operations and the reduction in his ballot control will be adequate to raise the money,” the experts composed. The new CEOs will “need to reveal that things have altered” and produce a new plan, they said.