WeWork is pushing back its initial public offering after encountering a cool reception from investors with concerns with its business model and corporate governance. Once valued at $47 billion, the office share company is facing questions amid a $1.61 billion loss in 2018 and worries about its co-founder’s control.
Wall Street had expected the company’s parent company, The We Company, to begin a road show to market its shares as early as next week. But now, the company said the IPO may not be completed until year-end.
“The We Company is looking forward to our upcoming IPO, which we expect to be completed by the end of the year,” the company said in a prepared statement. “We want to thank all of our employees, members and partners for their ongoing commitment.”
It’s a frosty turn in a blistering hot year for IPOs. Already, companies such as Uber, Lyft and Pinterest have drummed up widespread investor support, but WeWork appears to be having difficulty generating enthusiasm. While the company is growing rapidly, it doesn’t have the profits to show for it, losing $1.61 billion last year on $1.82 billion in revenue.
The We Company also recently announced that it was cutting by half — to 10 per share from 20 — the voting power of highest-class shares that CEO Adam Neumann and others would have after the IPO.
The concerns have taken a toll on its valuation, with The Wall Street Journal reporting that underwriters and bankers are now pegging its value at between $15 billion to $20 billion, rather than an earlier $47 billion.
What’s riding on its IPO
WeWork, which plans more aggressive expansion, has billions of dollars riding on a successful IPO. The New York company struck a deal last month that would give it access to $6 billion in financing raised by a group of banks, as long as it raises at least $3 billion in the IPO.
Founded as a co-working space in Manhattan in 2010, WeWork now has 527,000 members in 111 cities around the world. It mostly makes money by renting buildings and dividing them into office spaces to sublet to members.
The brand is popular with small businesses, start-ups and freelancers who can’t afford permanent office space. Members use an app to book ready-made offices or desks and get access to front-desk service, trendy lounges, conference rooms, free coffee and other services.
But its business model has not been tested in an economic downturn that could hurt its members, whose lease commitment currently average 15 months.
Economists have been concerned about a slowdown in business investment orders because it could imply that companies are getting hit by an escalation in trade disputes, particularly with China.