Vikram Malhotra

May 17, 2023

Justin Sullivan/Getty Images News Mizuho Securities USA analyst Vikram Malhotra downgraded WeWork (NYSE: WE ) to Neutral from Buy due to the "disruptive" exit of CEO Sandeep Mathrani and macro headwinds facing the co-working space company. With higher corporate layoffs and bankruptcies in the past two months, Malhotra said his base case business assumptions, particularly occupancy targets, now appear to be unachievable. As a result, higher cash burn will eventually drive the need for outside capital, he said. He doesn't see WeWork ( WE ) achieving positive free cash flow until the end of 2025. Mathrani's sudden departure after a three-year stint at WeWork ( WE ) "leads us to believe this change may not be entirely voluntary," the analyst wrote in a note to clients. Malhotra pointed out that the company made substantial progress under Mathrani's leadership, including eliminating $2.3B of recurring costs, increasing occupancy and revenue from COVID lows, and eliminating $1.2B of debt in its balance sheet restructuring. "We see the CEO change as disruptive in terms of strategy and likely employee turnover," the analyst said.