WE - As WeWork implodes Allbirds Mullen Automotive BuzzFeed could be next

2023-11-01 12:16:00 ET

WeWork (NASDAQ: WE) stock price plunged by more than 51% on Wednesday after reports said that the company was nearing bankruptcy . The shares have already plunged by over 90% this year, giving it a market cap of over $58 million. At its peak, WeWork had a market cap of over $45 billion.

WeWork thrived in the prolonged era of easy money in Wall Street. At the time, venture capital and private equity companies were throwing their capital at anything. This is best captured by a statement by Patrick Dwyer, the managing director at NewEdge Wealth who said that :

“Many of the reasons these guys outperformed had nothing to do with skill. Private equity is going to have a really hard time for a while?.?.?.?The wind is blowing in your face today, not at your back.”

As WeWork implodes, it will not be the last one. Many companies that thrived in the era of low interest rates and unlimited capital will go bankrupt. Besides, there are signs that interest rates will remain at an elevated level for a while.

Mullen Automotive

Mullen Automotive (NASDAQ: MULN) is one company I expect to go out of business in the next 12 months unless a miracle happens. Mullen is a company in the electric vehicle industry that aims to be the next Tesla.

The challenge for Mullen is that it is burning cash at a fast pace. According to SeekingAlpha, Mullen had a loss of over $308.9 million in the last quarter. It lost $104 million and $376 million in the previous two quarters, respectively.

It ended the last quarter with $214 million in cash and short-term investments. It is also buying back its shares with some of these funds. Therefore, even if it reduces its losses sharply, the company will need to raise additional capital to fund its operations.

Other EV companies have shown how difficult and expensive building vehicles is. Companies like Rivian Automotive and Lucid Motors are losing thousands for every vehicle they sell.

Mullen Automotive could survive in an era of easy money. But we are not in this period any more, making it extremely difficult for the company. Further, there are signs that EV demand is slowing as evidenced by the recent GM, Ford, and Tesla earnings .

BuzzFeed

BuzzFeed (NASDAQ: BZFD) is another company that could go bankrupt unless the management sells. The company thrived in the early days of the easy money policy. At its peak, the company was valued at over $2 billion and had investments from the likes of Comcast and Redwod Capital.

BuzzFeed’s business is slowing. Its revenue dropped to $77.9 million in Q2, down from $106 million in the same quarter in 2022. Its net loss jumped to over $27 million in the same period.

As a result, it decided to exit its news operation and recently, the firm is considering selling Complex Network in a deal valued at less than $140 million. It is taking a steep haircut since the company acquired it in a $300 million deal.

The Complex sale will help to boost its balance sheet, which had just $41 million in cash and $155 million in debt.. Still, with the advertising business slowing, and demand for its services waning, bankruptcy cannot be ruled out in either 2024 or 2025. The alternative is where the company is sold.

Allbirds

Allbirds vs Mullen Automotive vs Buzzfeed

Allbirds (NASDAQ: BIRD) is another company that could go bankrupt. The firm has gone through serious headwinds in the past few months. Its biggest risk is that demand for its products has waned. As a result, the company decided to slash prices for some of its products this week.

Allbirds has failed to expand its product assortments. Its wool leggings failed, forcing the company to take a major writedown. It also attempted to launch underwears, puffer jackets, and golf shoes, which all failed.

Now, the company is focusing on its shoes, which are becoming less fashionable. In its most recent results, the company’s revenue dropped to $70 million from the previous $78.2 million. Its net loss was over $28 million.

Allbirds’ market cap surged to over $4 billion at its peak. This period was characterised by high demand for ESG products. Recently, however, as we have seen with wind and solar stocks , investors are no longer paying a premium for these assets. Therefore, we can’t rule out a situation where the company goes under soon.

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