Ucommune Said to File for US IPO in Wake of WeWork Debacle

Mainland co-working operator Ucommune is said to have filed for an initial public offering with the US securities regulator and is targeting a public listing before the end of the year, according to media reports.

The Beijing-based shared office unicorn, which is WeWork’s biggest rival in mainland China, lodged a confidential prospectus with the US Securities and Exchange Commission in September, according to sources cited by Reuters.

The move by the four-year-old company founded by former China Vanke executive Mao Daqing comes just over a month after WeWork was forced to shelve its IPO due to investor skepticism over the company’s prospects and growing doubts concerning valuations for co-working operators.

Mao has been talking up his intention to list the company on the stock market since early 2018 and said he had decided to shelve plans for an IPO in the third quarter of last year due to market uncertainty.

Citigroup and Credit Suisse On Board

Ucommune, which operates 200 locations across 37 cities including New York and Singapore, has held preliminary meetings to gauge interest from investors and is gearing up for a formal public marketing drive, while a decision to go ahead with the IPO will still depend on investor feedback, according to the sources who spoke with Reuters.

Citigroup and Credit Suisse are said to have been brought on board to work on a listing, while Bank of America has a minor role on the deal. An earlier report by tech news site The Information indicated that Ucommune would list on the NASDAQ exchange.

An enquiry from Mingtiandi to Ucommune officials regarding the reported filing had not been answered at the time of publication.

Analysts Surprised by Move

The co-working player’s decision to plunge into a listing so soon after investors rebuffed the WeWork IPO is reported to have surprised analysts, but a source quoted by the Financial Times said that the company had “monetised the business better than WeWork”.

Ucommune has concentrated more of its offering on hot-desking where members at its Shanghai centres pay between RMB 1,200 and 2,800 per desk per month, while WeWork has focused more on private offices with prices ranging from RMB 3,500 to RMB 8,500 per month depending on location.

Mao had confirmed three months ago that he was planning to raise as much as $200 million in a US IPO next year, although he had also said at the time that being acquired was still an option.

Those comments came two months after Ucommune raised RMB 200 million ($28 million) in a funding round led by a real estate affiliate of Chinese industrial conglomerate Beijing Xingpai Group.

The startup, which has yet to become profitable, was valued at $3 billion last November when it raised $200 million in a series D funding round led by All-Stars Investment Limited, a Hong Kong-based private equity firm that has invested in other mainland and Asian unicorns including Xiaomi and Grab.

Swallowing Up the Competition

Going head to head with WeWork in mainland China, Ucommune has swallowed up competing players in a series of acquisitions and mergers as it expands its operations across the country.

In its most recent deal last October, the flexible space provider topped up its portfolio with a further 26 locations in Beijing and Shanghai by absorbing Shanghai-based competitor Fountown.

Just five months before that, the company acquired rival Workingdom, which added a crop of 20 co-working centres in Shanghai, Beijing and Guangzhou, measuring a total of over 50,000 square metres (538,196 square feet), to its portfolio.

Dimming Investor Enthusiasm

Despite early investor appetite for flexible office space fuelling growth and providing funding opportunities for startups, pricing competition and a slowdown in venture capital financing has caused collateral damage in the sector.

Forty companies in China’s shared-office sector crashed out of the industry between January to October last year, according to a study by the China Real Estate Chamber of Commerce.

That same report indicated that about 40 percent of co-working projects were more than half empty at the time it was published in February of this year.

Since WeWork’s flopped IPO just over a month ago, reports have emerged of ultra-low occupancy rates across mainland China in its shared offices.

According to an account in the Financial Times, the company’s 43,600 desks were 36 percent empty in Shanghai this month, while 65 percent of its 8,000 desks in Shenzhen were vacant. In Xi’an, the vacancy rate was at 79 percent.