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Trading of WeWork (NYSE:WE) stock was halted pending news, indicating a bankruptcy filing may be imminent.
Before trading was halted, WE stock was selling at $1.13 per share, up 35% over the weekend. That would put the market capitalization near $60 million.
The trading halt was issued at 3:51 a.m., according to Bloomberg.
WeWork stopped paying rent at several major properties over the weekend.
This Is Not the End
The move should not come as a surprise. InvestorPlace reported extensively on it on Nov. 2. It’s expected stockholders, bondholders, and landlords will all take losses.
A WeWork bankruptcy filing could also be the first step in an unraveling of commercial real estate markets, according to The New York Times. That’s because of WeWork’s enormous footprint in cities like New York. There, it had 47 locations under rent and 60% of the city’s co-working space.
Landlords have already given rent concessions to the company as it spiraled down. Some might be tempted to offer more concessions to keep space occupied. That could be behind recent buys in WeWork stock.
The real value of Class B and C office buildings could be half what it was before the Covid-19 pandemic, according to some observers. Some landlords have already defaulted, as the value of some buildings is less than what is owed on them.
But just as the commercial office space market is collapsing, New York housing remains unaffordable. Small apartments have been consolidated into larger units to accommodate home-based executives. The city’s plan to change zoning codes would only get back the number of units lost in those conversions. The plan does include converting some offices into apartments.
What Happens Next?
The pandemic and resulting work-from-home trend hammered both the commercial and residential markets. It will take time to work out, but there’s an enormous opportunity coming to those who can create solutions.
A WeWork bankruptcy, while painful, will be the first step toward creating those solutions.
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As of this writing, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.