NEW YORK (AP) — WeWork has sounded the alarm on its ability to stay in business, prompting speculation around the future of the troubled workspace-sharing company.

Last week, WeWork warned there was “substantial doubt” about the New York-based company’s “ability to continue as a going concern” — which is accounting-speak for having the resources needed to operate and stay in business. WeWork pointed to increased member churn, financial losses and the company’s need for cash, among other factors, over the next year.

This isn’t the first time the future of WeWork has been uncertain. The company went public in October 2021 after a spectacular collapse during its first attempt to do so two years earlier — which led to the ouster of its CEO and co-founder, Adam Neumann. WeWork was valued at $47 billion at one point, before investors started to drop off due to Neumann’s erratic behavior and exorbitant spending.

WeWork has made notable efforts to turn the company around since Neumann’s departure, with executives pointing to improvements in annual revenue, significant cuts in operating costs and other growth opportunities as workplaces emerge from the COVID-19 pandemic. Still, experts say the risk of bankruptcy is on the table — bringing in questions around implications for the already-weakening world of office real estate.

Here’s what you need to know.

WHAT IS WEWORK?

WeWork is a provider of coworking spaces. The company leases buildings and divides them into office areas to sublet to its members, which include small businesses, startups and freelancers who want to avoid paying for permanent office space.

WeWork was founded by Neumann and Miguel McKelvey back in 2010. The startup promised to revolutionize workspaces and saw a meteoric rise in its early years, but over time, WeWork’s operating expenses soared and the company relied on repeated cash infusions from private investors.

Since Neumann’s 2019 ouster, the company has seen several leadership changes. Most recently, Sandeep Mathrani, who joined WeWork in 2020, stepped down in May — bringing David Tolley into the position of interim CEO.

“WeWork’s challenges are a legacy of its earlier and very aggressive expansion... And the costs (that the company bears from) that expansion continue,” said Sam Chandan, director of the Chao-Hon Chen Institute for Global Real Estate Finance at New York University’s Stern School of Business. “By many measures, company revenues and performance is improving, but not quickly enough.”

As of June 30, WeWork had 777 systemwide locations across 39 countries, the company said in last week’s earnings call. Of that, WeWork reported supporting 906,000 workstations and 653,000 physical memberships — equating to 72% physical occupancy. That’s down slightly from the 75% physical occupancy seen at 779 systemwide locations WeWork reported operating at the end of 2022.

On Tuesday midday trading, WeWork’s market capitalization stood at roughly $474 million. Shares were down more than 86% year end to date.

IS WEWORK CLOSING ITS DOORS?

No, at least not yet. But risk of bankruptcy is on the table, experts say.

WeWork has not filed for bankruptcy since last week’s announcement, and “anything is a possibility,” Samuel Rosen, assistant professor of finance at Temple University’s Fox School of Business, notes. “Whether or not this particular company... can actually get out of its current situation, that’s yet to be seen. History would say it’s possible, although I don’t know if I would say it’s probable.”

There’s also a big difference between liquidation bankruptcy and restructuring bankruptcy. Depending on the type of filing, bankruptcy could help mitigate some challenges WeWork faces through reorganization and other efficiency efforts, Rosen said — noting debt collectors will sometimes push for bankruptcy sooner rather than later, because they don’t want to see “risky action that would put their claims at further risk.”

WeWork did not comment directly on the prospect of bankruptcy. In a Tuesday statement to The Associated Press, a spokesperson said, “our members remain our top priority and we are resolutely focused on delivering for them for the long term.”

In last week’s earnings call, the company said that its ability to stay in operation is contingent upon improving its liquidity and profitability over the next 12 months. WeWork plans to negotiate more favorable lease terms, control spending and seek additional capital by issuing debt, stock or selling assets, the company said.

Tolley sounded an optimistic note in the company’s results for the second quarter, during which WeWork lost $349 million. While the interim CEO acknowledged factors impacting higher member churn and softer demand, Tolley said that “the company’s transformation continues at pace” — pointing to “a laser focus on member retention and growth, doubling down on our real estate portfolio optimization efforts, and maintaining a disciplined approach to reducing operating costs.”

WHAT IS WEWORK’S IMPACT ON COMMERCIAL REAL ESTATE?

Again, WeWork isn’t going out of business yet — and a bankruptcy filing might not lead to large location closures. But concerns around the company’s future brings attention to WeWork’s footprint in commercial real estate.

According to a recent Securities and Exchange Commision filing, WeWork was operating 43.9 million rentable square feet around the world as of December 2022 — including 18.3 million rentable square feet in the U.S. and Canada.

When looking at the total office inventory in the United States alone, 18 million square feet “is a small fraction,” Chandan said — but of course, if WeWork “discontinued meeting its its lease obligations, whether it’s part of a bankruptcy restructuring or some other event... for buildings that have exposure to WeWork, that would be a significant hit.”

Concerns about WeWork’s future come at a time when leasing demand for office space is weak overall, Chandan added. The COVID-19 pandemic notably led to rising vacancies in office space as working from home became increasingly popular. Major U.S. markets still struggling to improve occupancy in commercial real estate include San Francisco, New York, Chicago and Washington.

At the same time, there is a strong market for co-working space, Chandan said — noting that “WeWork is operating in a significantly more competitive market” than it was just several years ago, with a greater variety of options and amenities available to those looking to rent office space today.

There’s a “really important distinction” between WeWork’s current financial position and questions around the future of the co-working model as a whole, he said. “Those are two separate things.”