WeWork (WE) is renegotiating nearly all of its leases globally, and it expects to exit underperforming and unfit locations, according to a public letter by CEO David Tolley. The letter follows WeWork's warning last month that there was 'substantial doubt' about its ability to stay in business. Yahoo Finance Live's Seana Smith and Akiko Fujita break down the report and discuss the outlook for the company.

Video Transcript

SEANA SMITH: Let's also talk about another mover today. "WeWork is doing all it can to survive," CEO David Tolley writing in a public letter that the company is renegotiating nearly all of its leases and also plans to exit, quote, "unfit and underperforming locations." The letter following WeWork's warning last month that there was, quote, "substantial doubt" about its ability to stay in business.

Despite this though, the stock still under pressure, off another 5% today. And Akiko, you and I have talked time and time again just about the road ahead for WeWork. Obviously, it's going to be extremely hard given the macroeconomic conditions, given the trouble that we're seeing play out across the office sector, across the commercial real estate.

But when it comes to WeWork and their locations, they still have 777 locations globally as of the end of June. That's a heck of a lot of locations given the fact that occupancy and also membership fell again in the second quarter from the first quarter. So they're trying to do all they can to rein in some of their costs, save money where they can. Their ability though to renegotiate some of these leases with landlords, how flexible some of these landlords are going to be, that's the big question.

AKIKO FUJITA: You mentioned those 777 locations. That amounts to roughly $13 billion and long term lease obligations. And sure, that's down significantly from Adam Neumann's days, which exceeded $18 billion. But there's a few things that stood out to me in that letter that Dave Tolley put out.

One, he said specifically that current lease liabilities amount to over 2/3 of total operating expenses in Q2, specifically saying that is dramatically out of step with current market conditions. The company saying they plan to take immediate steps to fix inflexible and high cost lease portfolios.

But you know, Seana, I guess the question here, and we've gotten a number of answers from guests we've had on the show, which is how significant would it be if WeWork were to go under, or whether, in fact, they were not able to meet their leases. And that seems to still be sort of a mixed bag. Manhattan, for example, you know, they accounted for roughly a quarter of new leasing activity in New York. But when you consider just how many offices there are, it's still a small share.

SEANA SMITH: Yeah, very small share. But at least for New York, and also we talk about the fact that when we talk about office landscape, office real estate here, commercial real estate but specifically the offices, there's a huge divide, right, between the class A properties and some of those underperforming properties, some of the cheaper properties. And there was actually a report out here, a number of retail executives in recent weeks saying that this trouble here with WeWork, that that could actually further that divide between the class A properties and the more dated ones given the fact that a number of WeWork sites are in some of those lower quality buildings.

So even if it's with a city as large as New York, even if it's more of a New York specific story or a story more specific to some of those larger cities across the nation, still though you think those ripple effects would have some sort of impact across the industry.