Saturday, 21 September, 2019

WeWork IPO filing: Losses, risks, and platitudes

Adam Neumann center co-founder and CEO of WeWork attends the opening bell ceremony at Nasdaq in New York WeWork lays down marketing plans and risks in IPO filing
Ginger Lawrence | 18 August, 2019, 17:44

The filing Wednesday gives the most detailed financials to date of We Company, which was known as WeWork Cos. before a recent name change.

WeWork's losses accelerated in the first half of this year, though its revenue more than doubled, the filing shows.

Bankers at the firm knew their decision to balk at the full credit commitment would risk Morgan Stanley's role on an IPO, which is slated for September, some of them said.

The company said in April that it had submitted confidential paperwork with the US Securities and Exchange Commission to go public. Executives from major banks had been courting the company for years. The company previously reported it lost almost $2 billion in 2018, as it invests heavily to grow its business.

WeWork, which rents out co-working spaces to startups, freelancers and enterprises, has been expanding beyond co-working spaces.

The company reported huge revenue gains and losses. WeWork recorded losses of $400m in 2016, growing to $1.6 billion in 2018.

WeWork is pitching itself as a tech firm to investors rather than a real estate firm. The majority of WeWork's revenue from locations in the United States was generated from its locations in the greater New York City, San Francisco, Los Angeles, Seattle, Washington, D.C., and Boston markets.

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The We Company's CEO, Adam Neumann, has committed to donating at least $1 billion to charity in the next decade, or his control over the shared-workspace group will be nearly halved.

That's especially true when it comes to CEO Adam Neumann, whose complicated relationship with the company required 10 pages of disclosures.

The brash founders of WeWork, the global network of shared office spaces now on the cusp of going public, have officially stated their mission: "to elevate the world's consciousness".

If it goes ahead with the IPO, WeWork would be the biggest company by value to list on the USA stock market this year after ride-hailing firm Uber Technologies Inc (UBER.N). However, they did not disclose any other terms to the public at that time. That would make it the second largest U.S. IPO this year, behind Uber (NYSE: UBER).

The company will ultimately look to raise several billion dollars in the IPO following a substantial debt offering, Reuters has reported.

"Growth and new market development expenses are expensed as incurred and consist primarily of non-capitalized design, development, warehousing, logistics and real estate costs, expenses incurred researching and pursuing new markets, solutions and services, and other expenses related to the company's growth and global expansion". As of June 30, 2019, their run-rate revenue was $3.3 billion, representing 86% year-over-year growth, and a committed revenue backlog of $4.0 billion, approximately eight times the committed revenue backlog as of December 31, 2017. That's a lot, but it's also a lot less than the $US47 ($70) billion WeWork is supposedly worth. It is set to be the most valuable start up to head for an IPO since Uber earlier this year and will see the public's' appetite for fast-growing loss-making companies tested once again.

WeWork's parent company, The We Company, submitted the S-1 filing which listed $1 billion as the targeted amount to raise from the IPO, though that targeted figure can often fluctuate.