Hi, Last Friday, I saw a youtube video about WeWork is going bankrupt, which I 'feel' like to agree because we all know WeWork is, in general, a clown. So I was just literally trying to skim over their documentations to see how bad they are........ and ended up spending the whole weekend I want to emphasize that I'm an extreme amateur so what I'll say here could be completely wrong or something similar to that, that's exactly the reason why I want to check here. In fact, I want someone to find out some fundamental errors on my thought process, so that I won't buy them. I think people think WeWork is going bankrupt, that's why the price is really crashing. But after I spent a whole weekend I'm still curious about following two points Why are they going to bankrupt? What's the incentive for all? (I will share my thought shortly) If bankrupt, I learned the common stock is statistically going zero, but in WeWork's case, why it is going to be completely zero (I will share my thought shortly) Here is what I learned last weekend: Before April or around that time, Softbank had around 50% of WeWork stocks and a lot (idk the exact amount but probably more than 50%) of WeWork's debt. WeWork did debt restructuring, which means that they gave options debt owners to extend, reduce, or even eliminate the debt (exchange with stocks), or they could've say "let's just bankrupt", but did not happen. What happened is following: - I think (not 100% sure) other debt owners choose to extend the debt - (100% sure) Softbank, chose to convert majority of their debt to stocks (they still keep some debt) After debt restructuring, Softbank now owns around 70% of WeWork stocks. And they still have good amount of WeWork's debt. Also, (there's a small chance that I misunderstood about this press), I saw Softbank bought another 'newly issued' debt at the restructuring. Softbank bought another of another new debt in July, which is last month. I really don't know the exact ownership of all WeWork's debts at the moment, but this is my guess - Softbank still has good amount of (at least 800 millions for sure) out of total WeWork's debt, which is about 2.4 Billion (or 2.9 Billion including premium, which I don't know what that means) - Another 500 millions of high interest debt (out of 2.4B) is owned by Softbank's financier, Rajeev Misra, I don't know who that is but he looks like a friend of Softbank - Another good amount of debt (at least 350 millions) could be owned by commercial Real-estate related companies (Cushman something and brookfield asset, and starwood capital group). The reason why I say 'could be' is because I only know they are the original debt owner, they could've sold their debt to different companies. But Cushman is a public company and they still seem to own the debt (looking at their last report). I want to separate them out, because I think they will be at least 'cooperative' debt owner and even 'sympathetic' potentially. WeWork is (or was) renting some of their buildings. And we all know commercial real estate in the US is not in a good shape. After all, WeWork was once superstar in their industry. And now, WeWork is one of the remaining tenants that still willing to do some business in their collapsing properties. You can (and should) significantly ignore this part by the way, because in terms of dollar amount, WeWork is probably not that big to actually do 'something' about the commercial real-estate, but just adding some emotional context. - The other debt owners could be Fidelity and Blackrock and some VCs. Again I only know they are the original owners, not sure they sold to other or not. So I think the debt owners are, in general, the friends (or even the owner, in the case for Softbank) of WeWork. I believe WeWork could be worth something only when they are doing business. They are only 'something' when they are actually working, because they got nothing to liquidate except some Kombucha. In this case, why WeWork should bankrupt? Please let me know if I'm missing something. I really think I'm wrong in some part, so please be critical. There is a good chance that I'm totally wrong or there are some serious errors on my numerous assumptions. Even if they bankrupt (for some reasons), why will debt owners be harsh to common stock holders? Will Softbank (who has good amount of debt) be harsh to Softbank (stock owner)? If they are going to be harsh to themselves, why converted 1B worth of debt to stocks just 3 months ago? We all know Softbank was foolish on WeWork, but this foolish? WeWork, after all, is generating 3 billions in revenue, which means that they could be 'something'. They are not awesome, but still something. And they are getting closer and closer to break even if care about their cash flow (the only part that I failed to fully understand is their negative cash flow from the reduction of office rent long-term obligation, I think it might be from their early termination penalty due to exiting some worse locations, but not sure. Please let me know if any of you know what those items are). WeWork said they already renegotiate their rent and stuff so I don't know how much they could negotiate further, but what we all know is that WeWork has some good leverage. After all, WeWork is a legitimate tenant who's willing to do some business in their collapsing properties. If buildings that WeWork is located in went actually bankrupt, which is in the case of Los Angeles Gas Company Tower, it's probably even better because the new building owner who bought the building at discount could be open to lower WeWork's rent, because they bought it cheaper (but it's just one case I found, also a lot of assumptions here so don't count on this too much) And there is Softbank, after all the humiliation and billions of dollars, what's the possibility that they suddenly give up on WeWork completely? They put more money just a month ago, three month ago, convert a lot of debts to stock 4 months ago, why they did that if they are going to give it up suddenly? What was the point? So In general, I think all the stakeholders (WeWork, Building owners, Debt owners, and of course stock holders) want WeWork to continue rather than to die. I can go on and on but I will stop here. Please and please if any of you know something I don't know, let me know. Also I'm terribly sorry about not putting all the links to the documents and the sources (and also a huge skipping of explaining where are all those information come from), it's because im very lazy, however, if you comment any questions about them here i will tell you one by one
Price tells the whole story. Company can be fantastic. Financials all good. But if price is cratering, that is all you need to know. Don't overthink it.
this is what happens when you are an investor and not a trader, traders trade price and investors put their hope in verbage
WeWork is declaring bankruptcy to get some protection to clean up their balance sheet. It is an orderly restructuring of the business. In that process the debt holders and equity holders have to wait and see what happens. The value in the company is likely lost at this point. The question is what can be salvaged. Perhaps there's a leaner meaner new WeWork that will emerge with 1/10th the capitalization and increased profitability. But no matter what, the filing tells you that billions of value has been permanently impaired.