Short sellers snap up WeWork debt amid concern over its future
International investors have placed large bets against troubled office space company WeWork, after it pulled plans to float on the stock market amid widespread scepticism about its valuation and concern about its corporate governance.
About 10% of WeWork’s bonds, worth €67m (£60m) in total, were out on loan as of Tuesday, according to financial data firm IHS Markit.
The amount of a company’s bonds that are being borrowed at any one time is considered a proxy for investors taking short positions, which are bets that the company’s fortunes will deteriorate.
The cost lenders were charging to borrow the bonds also surged to record levels, indicating a clamour among speculators to obtain WeWork debt to take a short position on it.
At the same time, the cost of buying the bonds outright fell below 85 cents on the dollar, compared with nearly $1.05 (90p) in mid-August when the company filed its intention to float.
The decline in the market value of its bonds indicated falling confidence in the company’s ability to repay debts.
WeWork’s co-founder, Adam Neumann, was ousted as chief executive last week, amid investor concern over his behaviour, spending appetite and level of control he wielded over the company,
WeWork’s cancelled IPO was prompted by doubts from investors, including Japanese investment fund SoftBank, which expressed doubts about its sky-high valuation. The company had been valued at $47bn earlier this year, despite heavy losses. That price was cut by more than half before the proposed share sale but even that price seemed too high to many investors.
His replacements, co-chief executives, Artie Minson and Sebastian Gunningham, are thought to be considering making thousands of job cuts and selling a $60m private jet to streamline its business in readiness for a renewed attempt at a listing.