NEW YORK (AP) – WeWork will close the school it opened last year in New York with the lofty goal of promoting “conscious entrepreneurship” as the office-sharing company retrenches following its botched attempt to sell its stock on Wall Street.
The “WeGrow” elementary and preschool in Manhattan will close at the end of the 2019-2020 school year, the company said on Friday.
It’s WeWork’s first publicly announced cost-cutting step since it scrapped plans last month for an initial public offering of stock. The company abandoned the IPO after it generated tepid interest from investors worried about WeWork’s massive losses and corporate governance problems.
The stock-sale debacle posed an urgent funding problem for WeWork. It had hoped to raise USD3 billion in the IPO, which would have unlocked USD6 billion in financing raised by a group of banks to fund its aggressive growth strategy.
WeWork said the closure of the WeGrow school is part of its efforts to focus on its core office space leasing business, raising the possibility that it could shed more side businesses. Those include a fitness company called “Rise by We,” the co-living rental company “WeLive” and several tech acquisitions, including social media network Meetup.
WeWork is also in talks with longtime financial backers about new financing.
The New York company is burning through about USD2.8 billion each year, according to an estimate by Sanford C Bernstein analysts. At that rate, Bernstein projects WeWork could run out of cash to maintain its current plans by mid-next year. Bernstein estimates that WeWork needs at least at least USD6 billion in funding.
As the end of June, WeWork was sitting on USD2.5 billion in cash. It has USD1.5 billion coming in next year under an earlier deal struck with SoftBank, the Japanese investment firm. The company’s revenue has more than doubled annually over the last few years, reaching USD1.8 billion in 2018, mostly through lease acquisitions. But its losses have mounted almost as quickly, reaching USD1.6 billion last year.