Shares of WeWork Inc (NYSE: WE) declined on the heels of the shared workspace company’s announcement that Sandeep Mathrani was resigning, effective May 26.
WeWork is co-working space that is catered to start-up company and freelance workers who want an effective and productive environment.
The WeWork CEO will become a director at Sycamore Partners, a private equity firm and will over real estate activities.
“It has been a privilege to lead WeWork during a notable transformation,” Mathrani said in his resignation. “I am grateful to have been able to lead such a resilient group of employees who through it all stepped up to meet and beat every challenge.”
WeWork went public in 2021 under Mathrani’s leadership that involved navigating through the COVID-19 pandemic, restructuring and strengthening the company’s balance sheet, boosted revenue across all segments.
The company cut its debts by $1.5 billion and extended dates of some maturities as the company was struggling to preserve its cash.
Mathrani succeeded the founder of WeWork, Adam Neumann, after being ousted as CEO citing investor concerns. Neumann voted to remove himself in the shareholders meetings.
The Apple+ movie, “We Crash”, was based on the findings of WeWork including the idea of Adam Neumann. “We Crash” starred Jared Leto and Anne Hathaway that told the story of the rise and fall of Neumann.
The former WeWork CEO was known for his lavish wildchild lifestyle where Neumann faced scrutiny over his leadership and finances from investors. SoftBank, which was WeWork’s investor, paid Neumann $1.7 billion to step down as CEO.
Neumann is plotting a corporate comeback as he recruited talent from Citigroup and George Soros’ fund management company.
Board member David Tolley will serve as interim CEO until the company names a successor.
Mizuho Securities called the change a “disruptive” event, especially given the ongoing macro headwinds.
Vikram Malhotra downgraded the rating for WeWork from Buy to Neutral, while slashing the price target from $1.75 to 35 cents.
The macro environment has worsened over the past couple of months, with more corporate layoffs and bankruptcies, Malhotra explained.
“We now see our base case business assumptions, specifically occupancy target of 76% by YE23 and 78% by YE24, as unachievable, likely leading to higher cash burn and eventually driving the need for outside capital,” the analyst wrote.
“We do not see the company FCF being positive until FY25,” he added.
WeWork received a delisting notice after its shares dipped by $1 as it continues to fight to stay in the New York Stock Exchange.
The company shares had fallen by 76% this year as a result of the market capitalization of over $745 million.
Produced in association with Benzinga