For the past four years, WeWork Inc. has been trying to deliver a turnaround story — one in which the rowdy co-working startup transforms into a stable, profitable public company. It sloughed off Adam Neumann, its rambunctious co-founder and former chief executive officer, and replaced him with an industry veteran boasting a reputation of saving troubled real estate companies.

WeWork was not saved, and the co-working company now says there’s “substantial doubt” it will even be able to stay in business.

The New York-based company is bleeding cash, and customers of its office rentals are canceling their memberships in droves, WeWork said in a statement Tuesday. Its shares fell 26% in the first minutes of trading Wednesday morning.

Eoin Treacy's view

WeWork has looked like a bankruptcy candidate for quite some time. The primary reason it has survived is because its landlords are fearful that the loss of a primary tenant would bring down values in a whole building and contribute to the re-rating of commercial real estate. WeWork has been bargaining hard to renegotiate leases on just that assumption. They have been making the argument landlords would be better getting something rather than nothing. That doesn’t seem to be working any more.

WeWork potentially defaulting on $17 billion in debt and on several hundred high profile leases will have knock-on effects for commercial real estate.
Blackstone rebounded impressively in June but is now unwinding that short-term overbought condition. It will need to hold the region of the 200-day MA if recovery is to continue to be given the benefit of the doubt.