WeWork joins wave of firms valued over US$10b going public

Shared-office firm WeWork has operations in 425 locations as of Dec 31, including in the Williamsburg neighbourhood (above) in Brooklyn, New York. WeWork said on Monday that it had filed confidentially in late December to go public. Its IPO would be
Shared-office firm WeWork has operations in 425 locations as of Dec 31, including in the Williamsburg neighbourhood (above) in Brooklyn, New York. WeWork said on Monday that it had filed confidentially in late December to go public. Its IPO would be among the most eagerly anticipated in recent years. It was valued at US$47 billion (S$64 billion) in an investment this year.PHOTO: AGENCE FRANCE-PRESSE

NEW YORK • Over nine years, WeWork has grown from one work space in Manhattan into a global empire of trendily designed shared offices, business services and more.

Now, WeWork is hoping that public investors believe the company can eventually turn a profit from that vision.

WeWork announced on Monday that it had filed confidentially in late December to go public, becoming the latest hot start-up to consider heading to the stock markets.

Should the company follow through on its plans, its initial public offering (IPO) would be among the most eagerly anticipated in recent years. It was valued at US$47 billion (S$64 billion) in an investment this year.

The company helped take the idea of co-working - where it leases out commercial real estate, redesigns it for shared office space and sells memberships - to a new level of popularity. The business model gained cachet with trendy decor and, in many locations, beer and coffee on tap.

But those ambitions have come at a steep cost. The company's revenue doubled last year, to US$1.8 billion. But its losses more than doubled, to US$1.9 billion - and show no signs of reversing any time soon.

In its public announcement, WeWork said it filed a draft registration statement with the US Securities and Exchange Commission on Dec 28. That was after SoftBank, the Japanese technology conglomerate and one of the company's biggest investors, opted not to buy a controlling stake in the business.

  • 401k

    Number of memberships WeWork has as of Dec 31.

  • 425

    Number of locations where WeWork operates, as of Dec 31.

WeWork chief executive Adam Neumann wrote in a memorandum sent to employees on Monday: "We have regularly focused on how to take our business to the next level in every aspect."

In his memo, which was reviewed by The New York Times, Mr Neumann said an amended document was filed with regulators last week.

Many of the biggest decacorns, or privately held companies with valuations of at least US$10 billion, have filed to go public in the past several months. Among them are Lyft, the ride-hailing company, and Pinterest, the digital pin board. The biggest of them all, Uber, is expected to begin trading on the New York Stock Exchange in the coming weeks.

But within that cohort of IPO candidates, WeWork stands out for its combination of high-flying ambitions and unsettled financial outlook. It has become one of the biggest corporate landlords in the world, with about 401,000 memberships spread across 425 locations as of Dec 31.

Nearly two years ago, it bought the long-time Manhattan flagship of Lord & Taylor, the department store chain, to become its own global headquarters. But it has sought to add more and more services, some of which appear only tenuously related to corporate life.

Technically, its parent company is the We Co, whose stated mission is "to elevate the world's consciousness". It bought Meetup, the service for bringing together aficionados of common interests, like learning Dutch or knitting, in 2017. It opened a private school in Manhattan. And it invested in a wave-pool company.

That vision has won the company billions of dollars in funding from deep-pocketed investors. Chief among them is SoftBank, which has bet heavily on what it considers world-changing enterprises. Even after it decided not to buy the company, it put US$2 billion into the business - bringing its total investment in WeWork to US$10.5 billion.

WeWork executives defend their approach, arguing that they are seizing an opportunity.

Mr Michael Gross, the company's vice-chairman, said last month: "We're looking at building this business out, not just maximising profitability over the next one to two years."

It is the same argument that Uber, Lyft and others in this generation of technology darlings have made.

Investors in the public markets have appeared sceptical of companies that emphasise empire-building over breaking even for many years. Shares in Lyft were down 16 per cent from their IPO price as of Monday's market close, while those in social media company Snap were down 34 per cent from their debut price two years on.

And while WeWork has argued that it is in a strong financial position, with US$6.6 billion in cash and committee capital as of last year, critics worry that it could suffer if the economy worsens.

Among the chief concerns is the company being trapped in long-term leases with a drop-off in subscribers.

WeWork president Artie Minson said in March that WeWork could become profitable if it decided to take the foot off the growth acceleration pedal. If investors, either on the private or public markets, stop pumping the company full of cash, it might need to pump those brakes sooner.

NYTIMES

A version of this article appeared in the print edition of The Straits Times on May 02, 2019, with the headline 'WeWork joins wave of firms valued over US$10b going public'. Print Edition | Subscribe