Japanese investor Softbank, which has poured an estimated $10bn into property and flexible workplace office provider Wework, is reportedly now pushing the company to pull its planned stock market float, according to The Times newspaper in London. Softbank and its affiliated Vision Fund have a 29% stake in the group.
Parent holding company We Company announced large losses in August, news that was met with a storm of criticism.
WeWork reported a $1.9bn pre-tax loss in 2018, up from a $939m loss in 2017 and of $430m in 2016. 2019 is also in the red to the tune of $900m for the first six months.
WeWork provides working spaces or desks to companies and freelancers on a flexible basis, with rental agreements available for as short as one month. The brand has built a hipster reputation with games rooms and free beer and coffee. As distinct from IWG’s Regus brand or etc.venues, however, the spaces do not offer much privacy and few doors in their open plan layouts.
The Times reported that the company is losing up to $5m a day and that there are minimum future lease obligations of $47bn over the next 15 years.
Adam Neumann founded Wework in New York City in 2010 with a stated mission “to elevate the world’s consciousness”.
The possible postponement of the float would reflect a diminishing appetite for start-ups that bled cash. Uber, Lyft and Slack have all seen their share prices fall since flotation this year.
Wework is now reported at testing investor interest at a much lower valuation, below $20bn, which would represent a huge write down for Softbank and the Vision Fund.
In the City of London, Wework occupies more office space than anyone apart from the government and has 528 locations in 29 countries.
Neumann has a controlling stake in the company and, as The Times reported, had been forced to return a $5.9m payment that his family investment vehicle received from Wework for use of the ‘we’ brand.
Comments circulating on Twitter commenting on the company’s proposed float last month included:
‘I think my favourite WeWork thing is that it rents buildings owned by the CEO, who bought the buildings by borrowing against WeWork stock. Nobody seems to be questioning why this is okay…’ – San Francisco-based technology expert Laurie Voss.
‘WeWork’s IPO filing will be a key test of investor appetite for fast-growing, money-losing start-ups’ – Reuters.
‘WeWork’s all-male Board is pretty typical of IPOs these days’ – Bloomberg
In January, WeWork announced it was rebranding as The We Company. It brought trademarks for “we”. From whom? We Holdings LLC, an entity controlled by WeWork CEO Adam Neumann – Ellen Huet
‘Wework vs its primary competitor, IWG: – Half the revenue; Losing money; More than 10x the valuation. Yep, this totally makes sense, no insane valuations based on overusing the word “tech” here’. https://www.vox.com/recode/2019/8/14/20804029/wework-ipo-tech-company-valuation) – Ezra Klein, Vox.com
‘Based on the reporting about its IPO, @WeWork is basically just a commercial property management company that also includes some Enron-like legal structures and self-dealing transactions and Marianne Williamson-like self-help branding. Do I have that right? Disruption! Synergy!’ – Graham Steele, US financial regulation expert.