Flexible workspace provider Knotel lost $49 million since March, which came after it posted millions of dollars of losses before the coronavirus pandemic struck, while its cash reserves are dwindling, leaked financials obtained by Business Insider show.
Knotel — which was crowned a unicorn after it closed on a $400 million fundraising round last year — had net losses of $223 million in 2019, according to Business Insider. At the end of the first quarter in March, Knotel had about $36 million in the bank, down from the $51 million it had at the end of 2019.
A spokeswoman for Knotel declined to comment, but the company disputed some of the numbers cited by Business Insider. It did not say which ones were inaccurate.
(Disclosure: Observer Capital, led by Observer Media Chairman and Publisher Joseph Meyer, is a Knotel investor.)
The documents obtained by Business Insider shows that Knotel, which pitched itself as a steadier competitor to WeWork, was carrying $238 million in liabilities by the end of the first quarter while it owed vendors $84 million. Its total assets were listed at $110 million.
WeWork’s financials, which it released in August 2019 ahead of a planned IPO, showed billions of losses that were part of the reason the offering was scrapped, as Commercial Observer reported.
Publicly, Knotel said it had $350 million of contracted annual revenue at the start of 2020 — with a contract value nearly double that amount — and CEO Amol Sarva said the company expects to be profitable by the end of this year.
The coronavirus pandemic left the flexible office space market reeling as members were forced to work remotely and providers laid off workers to survive.
In March, Knotel laid off 30 percent of its 400 employees and furloughed another 20 percent, while 10 people on its management team slashed their salaries to cut costs, as CO reported.
Knotel plans to give back 20 percent of its 5-million-square-foot portfolio to landlords because of the pandemic, with a “large percent” of that space located in Manhattan, Sarva previously told CO.
Sources previously told CO that Knotel told some landlords it wouldn’t pay April’s rent, with one saying the company simply didn’t give a notice about the missed payment. Knotel has said that one-third of its members are looking for rent breaks during the pandemic, The Real Deal reported.
The company is not alone in missing rent payments while struggling to collect membership fees during the pandemic.
WeWork CEO Sandeep Mathrani told CNBC that it paid rent for 80 percent of its locations in April and May — while in “friendly” discussions with landlords for the other 20 percent — while it’s facing a mutiny from some members over its decision to still collect the fees while unable to use the space.
In May, a group of members hired lawyer Jim Walden to demand WeWork stop collecting the fees and pay back the ones already collected or face an arbitration process.