With its valuation in freefall and its shareholders buckling, WeWork’s Initial Public Offering (IPO) looks less and less likely to go through. According to the Financial Times, Softbank, the largest outside shareholder in WeWork, is urging the company to drop plans for a public listing.
The American property company provides shared workspaces for budding entrepreneurs and startups. It has spread rapidly across the world, has doubled its revenues every year since 2016 and is currently the largest office tenant in New York.
However, the company is yet to post a profit, filing losses of close to $700m in the first half of 2019 and losing more than $4bn in the past three and a half years. Consequently, it saw its initial valuation slashed last week from $47bn to below $20bn.
Potential investors were also put off by the company’s corporate governance style. Recently, Co-Founder Adam Neumann rebranded WeWork under a new parent organisation, We Company. The company purchased the trademark on the word ‘We’ from another company for $5.9m. It was soon revealed that Neumann actually controlled this other company. Last week, following a public shaming, Neumann returned the $5.9m that he had murkily paid himself.
Japanese conglomerate Softbank, alongside its Saudi-backed Vision Fund, has injected over $10bn into We Company thus far. It is set to invest a further $1.5bn in 2020 as part of a deal agreed to earlier this year.
If the IPO is shelved, We Company will lose access to a $6bn loan from a consortium of banks, including Goldman Sachs and JP Morgan. This loan is contingent on the IPO raising at least £3bn in new investment.
In his 1921 dystopian novel ‘We’, Yevgeny Zamyatin observed that “a man is like a novel: until the very last page you don’t know how it will end. Otherwise it wouldn’t even be worth reading.”
The story of WeWork does not seem to be worth reading, in this case it is clear how it will end. As NYU Professor Scott Galloway recently stated:
Prediction: Within 30 days - on a Friday or under cover of another big story - WeWTF announces it’s shelving its IPO due to market conditions, or some such.