WeWork losses revealed ahead of float as it struggles to elevate IPO consciousness
WeWork, the international flexible office provider, has revealed large losses as it attempts to float on the stock market.
Its co-working space provider parent holding, We Company, announced the financial news on 14 August, news that has been met with a storm of criticism, most notably on Twitter.
Releasing its financial information ahead of an IP, WeWork reported a $1.9bn pre-tax loss in 2018, up from a $939m loss in 2017 and of $430m in 2016. 2019 is also in the red to the tune of $900m for the first six months.
WeWork provides working spaces or desks to companies and freelancers on a flexible basis, with rental agreements available for as short as one month. The brand has built a hipster reputation with games rooms and free beer and coffee. As distinct from IWG’s Regus brand or etc.venues, however, the spaces do not offer much privacy and few doors in their open plan layouts.
Revenues are reported as rising, up to $1.5bn in the first half of 2019. Analysts have suggested the company is looking to raise at least $3bn although has not said where it is intending to list.
The Times newspaper in London writes that the company has had to raise increasingly large sums to keep up with its rate of expansion.
The WeWork prospectus has been widely mocked on social media, notably for some anodyne and New Age musings and straplines, including on the cover page of the IPO prospectus: ‘We dedicated this to the energy of We – greater than any one of us but inside each of us.’
The document also informs potential shareholders WeWork’s “mission is to elevate the world’s consciousness”.
It was also revealed that there are minimum future lease obligations of $47bn over the next 15 years.
The London Financial Times commented: “Over the past three-and-a-half years, Wednesday’s SEC filing reveals, WeWork made a total of $20.9m in lease payments to four properties in which [CEO] Adam Neumann has an interest, receiving $11.6m back in ‘tenant improvement reimbursements’ last year. Barring future discounts, it is still on the hook for almost another $237m in payments over the life of the leases.”
The company has moved to unpick this financial relationship with its CEO and says Neumann would sell his properties to a new entity called ARK, with ARK covering the costs Neumann incurred in buying the four properties.
A selection of comments posted on Twitter following the IPO and financial announcement from WeWork included:
‘I think my favourite WeWork thing is that it rents buildings owned by the CEO, who bought the buildings by borrowing against WeWork stock. Nobody seems to be questioning why this is okay…’ – San Francisco-based technology expert Laurie Voss.
‘WeWork’s IPO filing will be a key test of investor appetite for fast-growing, money-losing start-ups’ – Reuters.
‘WeWork’s all-male Board is pretty typical of IPOs these days’ – Bloomberg
In January, WeWork announced it was rebranding as The We Company. It brought trademarks for “we”. From whom? We Holdings LLC, an entity controlled by WeWork CEO Adam Neumann – Ellen Huet
‘Wework vs its primary competitor, IWG: - Half the revenue; Losing money; More than 10x the valuation. Yep, this totally makes sense, no insane valuations based on overusing the word “tech” here’. https://www.vox.com/recode/2019/8/14/20804029/wework-ipo-tech-company-valuation) – Ezra Klein, Vox.com
‘Based on the reporting about its IPO, @WeWork is basically just a commercial property management company that also includes some Enron-like legal structures and self-dealing transactions and Marianne Williamson-like self-help branding. Do I have that right? Disruption! Synergy!’ – Graham Steele, US financial regulation expert.