WeWork, the shared workspace provider, filed its initial public offering (IPO) paperwork in December 2018. Eight months later WeWork has released its paperwork to the public, and a WeWork IPO seems imminent. The company had been planning on a September 2019 IPO, but sources say WeWork could go public as early as next week.
According to Bloomberg, a WeWork IPO could potentially raise $3.5 billion. That would make it the second largest U.S. IPO this year, behind Uber (NYSE: UBER). Though negotiations are ongoing and the terms are not finalized, it is highly likely JPMorgan Chase and Goldman Sachs will underwrite WeWork’s IPO.
There’s no shortage of investor interest in a WeWork IPO. But, the jury’s still out on whether the company can turn a profit.
The Business
WeWork has come a long way in the last nine years. What began as one chic leasable office space in Manhattan has evolved into an innovative office space empire.
WeWork leases shared workspaces for tech startups, freelancers and small businesses. But as the business has grown, WeWork has seen more large enterprises use its workspaces. The company now manages over 10 million square feet of office space around the globe.
WeWork’s Valuation
WeWork is valued at a staggering $47 billion. To many investors that figure seems unrealistically high, and it very well might be. That valuation came after WeWork raised capital from SoftBank Group earlier this year.
No one can say whether WeWork will live up to this market valuation. The company has been hesitant to reveal its financial situation, which makes some analysts think the $47 billion valuation may be bloated.
What we do know is WeWork is looking to shore up this financial situation ahead of its IPO. Last year, it reported $1.8 billion in revenue and $1.9 billion in losses.
Adam Neumann, WeWork’s co-founder and CEO, must be evaluating Uber and Lyft’s disappointing initial public offerings. At the time of their IPOs, those companies both had high expectations and a lot of debt. Uber and Lyft’s share prices were driven down because investors felt it’d take too long for them to turn profitable. WeWork would like avoid that perception.
And it can. By selling debt.
Ideally, WeWork can raise a few billion dollars through an asset-based loan, possibly as large as $5 billion. Asset-based loans are great tools for rapidly growing companies like WeWork. Sometimes a company just needs a cash injection to get over the hump. WeWork wants to raise money this way to make profitability more feasible, at least in the short term.
WeWork’s Competitors
Regus
Regus is one of WeWork’s biggest competitors. The company has 3,000 locations spanning 900 cities with 2.5 million members worldwide. Regus is different than WeWork in that it allows users to rent office space by the day. Regus has some notable clients like Google and AT&T.
Industrious
Industrious is trying to go toe to toe with WeWork in some of America’s largest markets. For the most part, WeWork heavily outnumbers Industrious in terms of office locations. But when it comes to pricing, Industrious can undercut WeWork in nearly every city.
Knotel
Knotel has been in the headlines recently. The company announced it completed a $400 million financing round. And now Knotel has a valuation of $1 billion. Knotel is keeping an eye on the WeWork IPO, and looking to avoid some of the bad press that company has received.
Updates
10/1/19: WeWork Retracts IPO
It seems WeWork’s staggering valuation really was too good to be true. The company has filed a request with the SEC to withdraw its IPO. The smoke and mirrors of former CEO Adam Neumann didn’t work, and now cutting costs is the top priority. The company is taking a more financially savvy approach by implementing cost conscious co-CEO’s Sebastian Gunningham and Artie Minson.
10/24/19: SoftBank Bails Out WeWork, Takes Over
SoftBank now has an 80% stake in WeWork. Instead of cutting its losses, the Japanese conglomerate announced that it will provide WeWork with $5 billion in new financing. SoftBank also announced that it will immediately provide WeWork with $1.5 billion to signify its commitment to the company. It seems SoftBank isn’t ready to let go of the flailing WeWork.
Will the WeWork IPO Be a Good Investment?
If WeWork can prove to investors it can turn a profit quickly, WeWork’s IPO may be a success. Like with most unicorns, much of the money is made by large financial institutions. This will be no different with WeWork’s IPO. But that’s not to say money can’t still be made.
The 2019 IPO market has been hot with many more to come, including Airbnb, Peloton and Robinhood.
Keep an eye out for more of these potential investment opportunities.