What happened
Shares of WeWork (WE +0.00%) climbed as much as 153% early Thursday, according to data provided by S&P Global Market Intelligence, then tempered their gains to close up around 43% amid a broader market rally fueled by an encouraging consumer price index (CPI) report. Today's rebound effectively recovered much of the stock's staggering plunge yesterday, which came after the coworking spaces provider announced discouraging second-quarter results and warned that it might not be able to continue operating.
OTC: WE
Key Data Points
So what
To be clear, there was no company-specific catalyst to merit WeWork's pop today. Rather, shares jumped along with the broader market -- with the entire Nasdaq Composite Index up more than 2% today -- after an encouraging CPI report this morning showed inflation rose a less-than-expected 0.2% in July. Many market pundits speculate that the tame inflation reading could signal an impending pause to a long string of interest rate hikes from the U.S. Federal Reserve. Such a pause would be a positive catalyst for the stock market in general, and an even stronger tailwind for interest rate-sensitive assets like growth stocks and businesses like WeWork that may need to raise capital on more attractive terms.
Now what
Indeed, with only $680 million in liquidity remaining after posting a net loss of $397 million in the second quarter alone, WeWork stated in its quarterly filings that "substantial doubt exists" regarding its ability to continue operating -- a disclosure that's widely viewed as precursor to a potential bankruptcy filing. Management added that in order to continue operations, the company must be able negotiate improved terms on leases, lower membership cancellation rates, and raise more money through debt and/or equity issuances.
There's no guarantee, of course, that a mere pause in rate hikes will meaningfully improve WeWork's chances of survival in the near term. But if its shares keep rallying amid broader-market strength, it could certainly have a positive impact on the company's ability to issue more stock to stay afloat as it continues to burn cash in the coming quarters.
