WeWork Files for IPO – Valuation Remains a Mystery

Less than one month after revealing that its losses reached $1.9 billion in 2018 – more than double its 2017 deficit – WeWork has filed for an IPO in the US.

The shared office giant late on Monday revealed that it had confidentially filed for an initial public offering in December last year, just weeks after it had announced a November investment by its principal backer, Softbank, that valued the company at a reported $47 billion.

Since that time, WeWork has seen the Japanese venture firm scale back its planned investments in the co-working pioneer, which now joins Uber, Lyft and Pinterest among loss-making unicorns aiming for stock market listings in the US in the coming months.

Public Listing Could Happen This Year

In its public statement, WeWork, which has gone by the We Company since early January of this year, said that it had made amendments to its filing for the offering with the US Securities and Exchange Commission after having previously filed a Form S-1 with the regulator of US public markets in December. The company added that, “This process will enable WeWork to make the decision to become publicly traded, subject to market and other conditions.”

“From the first day, the goal of our company has always been about making a difference, impacting as many people as possible, and creating a world where people make a life and not just a living,” WeWork CEO Adam Neumann said in an internal company memo circulated on Monday which was cited by the Financial Times.

Neumann, who started the shared office giant in New York in 2010, is said to have added that WeWork does not have a schedule for its stock market launch, although the FT account cited informed sources which indicated the IPO could take place this year.

WeWork Plan Puts Shared Office Enthusiasm to the Test

The IPO plan will test the appetite among public investors for WeWork’s approach to shared space leasing.

While Neumann and his management team were able to double the company’s revenues to $1.82 billion in 2018, the cost of that growth may already being giving pause to WeWork’s existing backers.

Around the time of SoftBank’s November commitment, which at its reported valuation more than doubled WeWork’s 2017 worth of $20 billion, Neumann and his team were reported to be in talks with the Japanese venture investor to sell a controlling stake in the shared office firm in return for $16 billion in investment from Softbank and its Vision Fund.

However, that planned deal is said to have fallen apart due to reticence among Vision Fund’s backers with WeWork eventually receiving an additional $1 billion in fresh funding from Softbank’s own balance sheet in what some viewed as a consolation prize.

The Free Beer Premium

The experience of WeWork’s competitors at IWG, formerly known as Regus, gives some investors pause regarding the potential IPO. IWG, which operates the Regus shared office brand and its Spaces co-working stablemate among other brands, was unsuccessful in attempting to sell that London-listed firm last year for $3.7 billion.

WeWork’s critics point out that, while the US company offers free beer and trendy design to its members, IWG’s 2018 revenues of £2.35 billion ($3.06 billion) exceeded WeWork’s by 68 percent, and the 30-year-old company is profitable. IWG announced earlier this month that it would be selling its global operations on a franchise basis, starting with a $446 million disposal in Japan.

In Asia, where the amount of office space leased by co-working and other flexible office operators grew nearly 39 percent more quickly than in the US during the period from 2014 through 2017, according to statistics from JLL, the health of these typically venture funded startups is already showing signs of fraying.

Kr Space, a mainland co-working operator backed by IDG Capital and Gopher Asset Management, was recently sued for HK$500 million by its landlord for backing out of a lease for seven floors in a Hong Kong office building, with the company said to have closed six mainland centres and laid off staff.

While WeWork has reportedly signed a new lease in Hong Kong’s Tsim Sha Tsui area this year, the shared office giant is also showing signs of pulling back in the world’s most expensive office market, with brokers saying that the once free spending firm has pulled out of at least five negotiations to take on new space in Hong Kong this year, Reuters reported earlier this month.