WeWORK TROUBLES CONTINUE
By Todd Horwitz
WeWork Tries to Rebuild
Co-working company WeWork said Monday it will ask to withdraw its initial public offering filing with the Securities and Exchange Commission, postponing its attempts to go public indefinitely. The announcement is the latest in a string of bad news for the embattled We Co., following the departure of chief executive Adam Neumann last week after a Wall Street Journal report on his problematic behavior. WeWork earlier this year was valued as high as $47 billion, but in recent weeks the company considered an offering that would slash its value to as low as $10 billion, according to Reuters. The company had already delayed its IPO.
WeWork’s core “space-as-a-service” business involves turning leased buildings into co-working spaces that offer perks like yoga classes. Under the We Co. umbrella, the company has recently expanded into apartment rentals, data analytics and education. The suspended IPO raised an immediate funding challenge for WeWork, which had counted on a successful stock offering to pursue the meteoric growth strategy that made it so attractive to private investors in the first place. The company, which began as a co-working space in Manhattan in 2010, had planned to expand in many of the 111 cities where it now operates and launch in up to 169 additional cities across the world.
Analysts have said WeWork’s outlook could improve if it raised cash and slowed its growth to conserve capital, even though that would lower its long-term value. Its revenue has more than doubled each year since 2016, mostly through its acquisition of new property leases. “It’s a dangerous line they have to walk. You have to keep up the revenue growth, and for that you have to keep adding properties. And to keep adding properties you have to keep getting investment or issue stocks or bonds,” said Dan Morgan, senior portfolio manager for Synovus Trust.
Without revenue growth, “you lose the whole magnet of why anyone would be interested in the stock, because you aren’t profitable,” he added. WeWork’s new co-CEOs, Artie Minson and Sebastian Gunningham, said the company was suspending its IPO to “focus on our core business, the fundamentals of which remain strong.” The company gave no further details, but its core business involves leasing buildings and dividing them into office space that it rents out to members, many of them startups, freelancers and small business owners who cannot afford permanent office space.
The We Company also has an eclectic portfolio of side businesses meant to cater to the well-being of its members — a community-building vision set forth by Neumann, a magnetic Israeli immigrant who partly grew up on a kibbutz, and his wife Rebekah Neumann, a certified yoga instructor who studied both business and Buddhism at Cornell University.
Those ventures include a fitness company called “Rise by We,” a school for children called “WeGrow,” and a co-living rental company “WeLive.” An acquisition spree included the social media network Meetup. Larger corporations are also a growing part of the company’s customer base because it offers a cost-efficient way to expand to new markets or recruit workers from a wider selection of cities without having to build new offices. But WeWork’s grandiose vision failed to resonate on Wall Street after the company revealed massive losses in its IPO filings. Initially valued at $47 billion, WeWork was considering an IPO priced at well below $20 billion before pulling out. For now, WeWork has cash. It was sitting on $2.5 billion at the end of June.
Todd “Bubba” Horwitz