Beleaguered WeWork may be pondering bankruptcy and licking its wounds as it tries to recover with the help of debt restructuring transactions, but the company began the month of September on a good note. WeWork completed its 1-for-40 reverse stock split, thereby rendering the company compliant with the Securities and Exchange Commission’s requirement of maintaining a $1.00 per share minimum closing price. On Tuesday, September 5, the first trading day after the reverse stock split, WeWork’s shares opened at $3.74, marking the first time since March 22, 2023, that the global flexible space provider’s stock started the day at more than $1.00. It’s a step in the right direction, but WeWork is hardly on terra firma, unlike its largest competitor, Switzerland-based Regus.
Regus trades on the London Stock Exchange as British holding company IWG plc and saw its stock open at £174.80, or approximately $220, on September 5. Both companies’ names are recognized across the globe as the leading providers of flexible workspace, but Regus is older and, judging by a host of barometers, perhaps wiser. Not that the company hasn’t had its share of major problems.
WeWork came on the flex workspace scene like Gangbusters in 2010 and reached its height less than a decade later in 2019, when the company was valued at $47 billion. At its peak, the company offered members more than 800 locations spanning 30 countries. Its footprint, however, never came close to matching that of Regus, which offers more than 3,000 locations in 120 countries. And, of course, considering WeWork’s current woes, the companies are at opposite ends of the financial health spectrum. In the first six months of 2023, Regus logged revenue totaling nearly £1.7 billion (approximately $2.1 billion), marking a record high for the company, and saw a net loss of £61 million ($76.7 million). WeWork recorded total revenue just short of $1.7 billion for the first half of 2023 and found itself saddled with a net loss of $696 million.
WeWork, having noted in August in its second quarter 2023 earnings report that “substantial doubt exists about the company’s ability to continue as a going concern,” can look to Regus as an example of the viability of a comeback. One year after going public in 2000, Regus expanded its footprint in the United States with the $10 million acquisition of Stratis Business Centres, but in 2002, the company found itself in dire need of a cash infusion and sold a 58 percent stake in its United Kingdom business. The move proved insufficient to rescue the company’s position across the pond, and Regus’s U.S. division entered Chapter 11 bankruptcy protection in 2003 but reemerged from insolvency within 12 months.
By 2006, Regus had the resources to buy back the controlling interest in its U.K. division. The company spent the next 13 years in growth mode, acquiring company after company. And it went through a name change, going from Regus plc to IWG plc (International Workplace Group). Unlike WeWork, which rebranded itself as The We Co. in 2019 before reverting to WeWork in 2020, IWG remains the umbrella for the Regus brand and several other office-on-demand brands, including Spaces and HQ.
Regus had a good run until the COVID-19 scourge spread around the world. In 2020, nearly 100 IWG entities filed for bankruptcy with the goal not to restructure but to renegotiate pricey, long-term lease agreements. The extensive list of bankruptcies was all the talk in the industry, but IWG also took steps to cut costs, including slicing Board remuneration by 50 percent and canceling shareholder dividend payouts. Three years later, IWG appears to be back on track and in growth mode, with plans to expand through partnerships.
While WeWork’s troubles may be more complex than those of IWG a few years ago, the company’s leadership appears to be doing its level best to avoid the dreaded “B” word (bankruptcy). WeWork announced in August that it will endeavor to enhance liquidity over the next 12 months by taking such steps as ranging from reducing rent and tenancy costs through lease negotiations to locking in additional capital debt or equity securities issuances or the disposition of assets. In early September, WeWork commenced a global plan to engage its landlords in the renegotiation of its office leases. The goal of the process is for the company to retain its workspace offerings at office buildings in key markets but under less expensive lease terms and to free itself of lease obligations at properties in underperforming locations.
Although WeWork has a long road ahead to a recovery that may ultimately prove unattainable, IWG’s resurgence is proof that a major office space provider can come back from the brink, even in the midst of a struggling office market. WeWork and IWG both suffered the financial ramifications of growing too fast, and both turned to cost-cutting measures in an attempt to make a turnaround. But the public companies are not twins. IWG chose to embrace the benefits of bankruptcy proceedings, but WeWork is desperately trying to avoid that route.
And while the companies are in the same business, they are operated differently. IWG serves as the parent of a group of brands that includes Regus, while WeWork is a singular brand. IWG has set its sights on servicing hybrid work needs and expanding its offerings through partnerships with players in other industries like hotels and airlines. WeWork continues to focus on flexible and collaborative workspace in uniquely designed spaces and carefully chosen locations that foster community.
Despite their differences, IWG’s roadmap to recovery may be something that WeWork could adapt and implement for its own rebirth. Or not. If WeWork’s investors decide that bankruptcy is the best way forward for the company, then Regus may be around to pick up some of the pieces, albeit in a manner more carefully calculated than the growth plan that led to its own financial failures.
