WeWork is pushing back its initial public offering after encountering a frosty reception from investors with concerns with its money-losing 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 grip over the company and its board.
Wall Street had expected WeWork parent The We Company to begin a road show to market its public 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 cold turn in a 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 it was cutting by half — to 10 per share from 20 — the voting power of the highest-class shares that CEO Adam Neumann and others would have after the IPO.
The concerns have taken a toll on its valuation, with he Wall Street Journal reporting that underwriters and bankers are now pegging its value at between $15 billion to $20 billion, rather than the 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, including keg parties for members.
But its business model has not been tested in an economic downturn that could hurt its members, whose typical lease commitment currently averages 15 months. Many economists and corporate executives expect a further slowdown in business investment orders in the U.S. coming months as companies here and overseas get hit by global escalations of trade disputes, particularly with China.