WeWork, the global coworking group, has received a non-compliance notice from the New York Stock Exchange as its share price has refused to budge above $1 a share for 30 trading days.
The notice raises the possibility of the group having to delist or conduct a reverse stock split as its share price has sunk 90% from a market value of $9 billion (£6.53 billion) since it listed in March 2021.
That transaction was funded via special purpose acquisition company BowX’s $483 million of cash in trust plus a fully committed $800 million private placement investment at $10 per share led by investors including Insight Partners, funds managed by Starwood Capital Group, Fidelity Management & Research Company, Centaurus Capital, and funds and accounts managed by BlackRock.
That agreement was at a significantly reduced value from the $47 billion (£34.10 billion) it was valued at for listing in 2019, before those proposals spectacularly collapsed. WeWork, which had surging growth in its first decade after its 2010 founding, has been trying to focus on more profitable leasing deals in recent years.
The notice that it does not meet the minimum share price requirement does not result in the immediate delisting of the company’s common stock from the NYSE, and under the exchange’s rules it has six months to respond and resolve the situation before that happens.
In a statement it said it will respond to the NYSE “affirming its intent to cure the deficiency” within 10 business days of receipt of the notice.
It said it is considering a number of available alternatives to cure its non-compliance. At the moment a range of investors cannot invest in the stock because the value of what is effectively a penny stock is too low for their investment parameters.
One option likely to be on the table is a reverse stock split led by majority shareholder Japan’s SoftBank. A reverse stock split is a reduction in the number of a company’s outstanding shares in the market which automatically boosts the value of the stock. It is typically based on a predetermined ratio. For example, a 2:1 reverse stock split would mean that an investor would receive 1 share for every 2 shares that they own.
There are a number of factors that may lead to WeWork’s share price improving, notably completion of a major financial restructuring announced in March and progress on hitting profitability at last as well as improvements to its revenue and cash position via a number of strategies outlined in a recent letter to shareholders by CEO Sandeep Mathrani. WeWork reported progress on the restructuring this week, publishing the early tender results of the exchange offers.
Mathrani joined in 2020 when WeWork faced a battle to cut debt and shore up investor sentiment in a company battered both by a first failed attempt at a public listing, and in turn the pandemic. He has repeatedly called for patience, saying the business model is being placed to eventually benefit from structural changes in how offices are occupied.