(Oct 1): WeWork formally withdrew the prospectus for its initial public offering, capping a botched fundraising effort that cost the top executive his job. The defeat places urgency on WeWork to find new sources of capital to keep the lights on.

The New York-based company had a deadline for completing a successful stock listing by the end of the year in order to secure a US$6 billion ($8 billion) loan, in addition to at least US$3 billion in capital that WeWork would have raised in the IPO. With WeWork set to run out of cash as soon as next spring at the current pace of spending, the two co-chief executive officers, who replaced co-founder Adam Neumann last week, are weighing possible staff cuts and divestitures.

See: A new CEO is not the only thing WeWork needs

WeWork is also in talks with investment banks about a new US$3 billion loan, which would also be contingent on selling a substantial amount of new equity, people familiar with the matter said last week. A likely source of that equity infusion is SoftBank Group Corp., the largest investor in WeWork.

Bonds in WeWork dropped to a record low Monday after the company said it was pulling the IPO. The 7.875% notes, due in 2025, fell as much as 2.7 US cents on the dollar to 84.5 US cents, according to Trace. At current levels, the bonds yield more than 11.6%.

“This puts an official pause on our process of becoming a public company,” Artie Minson and Sebastian Gunningham, the new co-CEOs of WeWork parent We Co., said in a note to staff. “Rest assured, WeWork will become a public company, but we can only IPO once, and we want to do it right.”

The withdrawal ends a turbulent process that turned one of the most hotly anticipated IPOs into a cautionary tale of the public market’s reticence to pay up for an unproven business model. Neumann stepped down as CEO last week after concerns about corporate governance and the money-losing startup’s aggressive spending. WeWork had sought to be valued as a technology company, though many public investors saw it as an overpriced real-estate stock. The scale of this flop has no peers in the tech business since at least the dot-com bubble, said Daniel Morgan, senior portfolio manager at Synovus Trust Co.

“I’ve never seen anything like this before,” Morgan said. “This is a very high-profile tech IPO that went all the way up to a roadshow and then yanked it. WeWork has to start controlling the narrative and show strong top-line growth. They also have to answer questions: How will you sustain the model? How are you getting the money? Are you going to go bankrupt? If you can’t get cash, then what are you?”

WeWork, which leases and owns spaces in office buildings and then rents desks and rooms to customers, has raised more than US$12 billion since its founding nine years ago and has never turned a profit. The company had been targeting a share sale of about US$3.5 billion in September, people familiar with the matter have said.

But the IPO plans filed in August were met with a blistering reception from some. Triton Research Inc. Chief Executive Officer Rett Wallace called the company’s prospectus a “masterpiece of obfuscation,” saying it obscured key details needed to understand the economics of its business.

SoftBank and its affiliates, which hold a 29% stake in the rental office company, pressed WeWork to postpone the stock offering, people familiar with the matter have said. The Japanese conglomerate has invested about US$10.7 billion in WeWork since the start of 2017 and holds two board seats. A funding round led by SoftBank earlier this year valued WeWork at US$47 billion, but financial advisers had said recently that it would likely only fetch about a quarter of that.

The path toward a public listing took a left turn two weeks ago when the company said it would delay its IPO but committed to completing the offering this year. For the next week, Neumann faced mounting pressure from board members and investors. By Tuesday morning, he and the board had agreed he would step down. During a conference call, Neumann cast his vote against himself, knowing the outcome was already determined.

WeWork will likely postpone the offering until next year, Bloomberg reported last week. The delay sidelines what was expected to have been the second-biggest IPO in the US this year after Uber Technologies Inc. The US$6 billion credit facility will be unwound if the IPO doesn’t happen this year, a person with knowledge of the matter has said.

After having lost US$900 million in the first half of this year, WeWork is planning on selling three businesses it acquired in recent years, according to people familiar with the matter, as well as a US$60 million Gulfstream jet bought for Neumann to use on company business. The company, which has more than 12,000 employees, is also exploring job cuts that would number in the thousands, as the new CEOs prep the business for another attempt at a stock listing.

“While this may feel disappointing, the leadership team and our board have decided to take a step back to assess where we are as a company,” the CEOs said in the internal note Monday. “These past few months have not been easy, but our team has been incredibly resilient. We are now focused on improving our core business -- balancing expansion with a focus on profitability.”