$WE Second Leg Shenanigans
Over the past weeks, meme stock traders have been intensively focused on buying shares of struggling companies in an attempt to force short sellers to cover their positions – squeezing these stocks in turn. One of the stocks currently seeing strong momentum is WeWork Inc (NYSE: WE) which may be set to file for bankruptcy soon due to its financial struggles. With that in mind, the company recently warned investors that it has substantial doubt about staying in business in a similar fashion to Yellow Corporation (NASDAQ: YELL) which ran 615% upon hinting at the possibility of bankruptcy. Given the growing trend of struggling stocks making impressive runs, WE stock could be one to watch for a continuation of its run this week.
WE Fundamentals
The pandemic hit many businesses hard, one of which was WE which saw a $2.1 billion loss due to remote work that encouraged its clients to exit their leases en masse. In 2021 alone, the company’s revenues dropped sharply YoY from $1.1 billion to $598 million thanks to a 30% decline in its clientele base.
Based on its losses, the company had to rely on debt to survive like its $1.1 billion loan from SoftBank. Given its accumulating debt and its inability to generate cash from its business, it is no surprise that what once was a hyped IPO is on the brink of bankruptcy.
In its latest Q2 2023 report on August 8th, WE stated “Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern” which is usually business jargon for “bankruptcy may occur soon”.
The introduction of this language in the company’s latest quarterly report is somewhat similar to YELL shutting down operations on July 31st ahead of its bankruptcy filing which took place on August 8th. Considering that YELL stock ran 615% upon shutting down operations until filing for bankruptcy, WE stock could also continue running until its inevitable Chapter 11 filing.
Given the similarities between both companies’ situations, WE may end up mirroring YELL stock and continue running over the course of this week. This is mainly due to a new trend among meme stock traders in which they target companies with alarming signs on their ability to continue operating to force short sellers to cover their positions.
This trend began when meme stock traders targeted Rite Aid Corporation (NYSE: RAD) and Tupperware Brands Corporation (NYSE: TUP) which ran 96% and 500% respectively. Considering that WE is in a similar position as these struggling companies, it is likely the stock could be the next target for meme stock traders which could make it a profitable trade before its bankruptcy.
WE Financials
According to the company’s Q2 2023 report its assets decreased from $17.8 billion at the beginning of the year to $15 billion which is mainly due to a $2 billion loss due to lease right-of-use asset impairment. Meanwhile, the company’s cash balance declined from $287 million to $205 million due to the company paying off some of its current liabilities that fell from $2.2 billion to $2.1 billion. On that note, the company’s total liabilities decreased from $21.3 billion to $18.6 billion largely due to a drop in long-term leasing obligations from $15.5 billion to $ 13.2 billion.
Despite this substantial decrease in long-term liabilities, the company’s liabilities are extremely worrying since WE’s current assets are only valued at $744 million and its current liabilities are more than double that figure at $2.1 billion. This indicates that WE’s current ratio is 0.33 which is extremely alarming since any current ratio under 1 raises worry about a company’s ability to pay off current liabilities and therefore hints that bankruptcy may be soon.
When it comes to revenues, WE experienced a YoY increase from $815 million to $844 million due to more companies returning to work from office after the pandemic. On the other hand, the company’s expenses increased from $1.13 billion to $1.19 billion which in turn means that the company has a negative cash flow from operations of $500 million. Despite this, the company’s net loss decreased from $635 million to $397 million due to a combination of foreign currency gain, improved revenue, and decreasing pre-tax-loss.
Technical Analysis
WE Stock is in a neutral trend and is trading in a sideways channel between $0.2, and $0.3. Looking at its indicators, the stock is currently trading above the 21 MA which is a bullish indication, but below the 50 and 200 MAs which is a bearish indication. Meanwhile, the RSI is neutral at 50 and the MACD is approaching a bearish crossover.
Given that WE is in a similar position to YELL before declaring bankruptcy, the stock may continue witnessing strong momentum this week and continue its run. With the stock trading near support, the current PPS could be a good entry point for bullish traders with take profits on retests of the 200 MA and the $.30 resistance. A stop loss could be set at $.18 if the stock breaks support.
WE Forecast
With the growing trend of meme stock traders targeting stocks of struggling companies to force short sellers to cover their positions, WE stock could be the next in line to witness a parabolic run this week after the company hinted at the possibility of bankruptcy. Given that the company is in a somewhat similar position to YELL when it shut down operations ahead of declaring bankruptcy, the stock could see a similar run to YELL stock when it ran 615%. With this in mind, WE might file for bankruptcy soon given its losses and its current liabilities dwarfing its cash balance which makes it an extremely risky trade.
WE Fundamentals
The pandemic hit many businesses hard, one of which was WE which saw a $2.1 billion loss due to remote work that encouraged its clients to exit their leases en masse. In 2021 alone, the company’s revenues dropped sharply YoY from $1.1 billion to $598 million thanks to a 30% decline in its clientele base.
Based on its losses, the company had to rely on debt to survive like its $1.1 billion loan from SoftBank. Given its accumulating debt and its inability to generate cash from its business, it is no surprise that what once was a hyped IPO is on the brink of bankruptcy.
In its latest Q2 2023 report on August 8th, WE stated “Our losses and negative cash flows from operating activities raise substantial doubt about our ability to continue as a going concern” which is usually business jargon for “bankruptcy may occur soon”.
The introduction of this language in the company’s latest quarterly report is somewhat similar to YELL shutting down operations on July 31st ahead of its bankruptcy filing which took place on August 8th. Considering that YELL stock ran 615% upon shutting down operations until filing for bankruptcy, WE stock could also continue running until its inevitable Chapter 11 filing.
Given the similarities between both companies’ situations, WE may end up mirroring YELL stock and continue running over the course of this week. This is mainly due to a new trend among meme stock traders in which they target companies with alarming signs on their ability to continue operating to force short sellers to cover their positions.
This trend began when meme stock traders targeted Rite Aid Corporation (NYSE: RAD) and Tupperware Brands Corporation (NYSE: TUP) which ran 96% and 500% respectively. Considering that WE is in a similar position as these struggling companies, it is likely the stock could be the next target for meme stock traders which could make it a profitable trade before its bankruptcy.
WE Financials
According to the company’s Q2 2023 report its assets decreased from $17.8 billion at the beginning of the year to $15 billion which is mainly due to a $2 billion loss due to lease right-of-use asset impairment. Meanwhile, the company’s cash balance declined from $287 million to $205 million due to the company paying off some of its current liabilities that fell from $2.2 billion to $2.1 billion. On that note, the company’s total liabilities decreased from $21.3 billion to $18.6 billion largely due to a drop in long-term leasing obligations from $15.5 billion to $ 13.2 billion.
Despite this substantial decrease in long-term liabilities, the company’s liabilities are extremely worrying since WE’s current assets are only valued at $744 million and its current liabilities are more than double that figure at $2.1 billion. This indicates that WE’s current ratio is 0.33 which is extremely alarming since any current ratio under 1 raises worry about a company’s ability to pay off current liabilities and therefore hints that bankruptcy may be soon.
When it comes to revenues, WE experienced a YoY increase from $815 million to $844 million due to more companies returning to work from office after the pandemic. On the other hand, the company’s expenses increased from $1.13 billion to $1.19 billion which in turn means that the company has a negative cash flow from operations of $500 million. Despite this, the company’s net loss decreased from $635 million to $397 million due to a combination of foreign currency gain, improved revenue, and decreasing pre-tax-loss.
Technical Analysis
WE Stock is in a neutral trend and is trading in a sideways channel between $0.2, and $0.3. Looking at its indicators, the stock is currently trading above the 21 MA which is a bullish indication, but below the 50 and 200 MAs which is a bearish indication. Meanwhile, the RSI is neutral at 50 and the MACD is approaching a bearish crossover.
Given that WE is in a similar position to YELL before declaring bankruptcy, the stock may continue witnessing strong momentum this week and continue its run. With the stock trading near support, the current PPS could be a good entry point for bullish traders with take profits on retests of the 200 MA and the $.30 resistance. A stop loss could be set at $.18 if the stock breaks support.
WE Forecast
With the growing trend of meme stock traders targeting stocks of struggling companies to force short sellers to cover their positions, WE stock could be the next in line to witness a parabolic run this week after the company hinted at the possibility of bankruptcy. Given that the company is in a somewhat similar position to YELL when it shut down operations ahead of declaring bankruptcy, the stock could see a similar run to YELL stock when it ran 615%. With this in mind, WE might file for bankruptcy soon given its losses and its current liabilities dwarfing its cash balance which makes it an extremely risky trade.
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