Coverage: WeWork seeking to raise funds as revenue rises

WeWork Cos. is seeking to raise funds at a $35 billion valuation, a price tag that would place the co-working startup above companies like Airbnb and SpaceX.

Ellen Huet of Bloomberg News had the story:

Rajeev Misra, who runs SoftBank’s $100 billion Vision Fund and is the chief executive officer of SoftBank Investment Advisors, said Tuesday at the CogX conference in London that even though WeWork has been criticized as overvalued at $17 billion, it’s now raising money at $35 billion, according to a person who saw a video of the talk, which is no longer available online. Misra also said that WeWork could at some point be a $100 billion company, but didn’t comment further on whether SoftBank would participate in this funding. WeWork declined to comment.

WeWork, which runs shared office space for startups as well as large enterprises, has raised billions of dollars in equity, including $4.4 billion last summer from SoftBank, which split the money between WeWork’s central business and its three Asian subsidiaries. Misra’s comments were reported earlier by Business Insider.

For more cash, WeWork tapped the bond markets in April when it sold  $702 million in seven-year unsecured bonds. The company’s bond offering documents showed fast-growing sales but even faster-increasing losses. WeWork had total revenue of $886 million but a net loss of $933 million in 2017, according to the documents. It has also committed to pay $18 billion in rent in the coming years for the buildings it currently leases, $5 billion of which will be due in the next four years.

Ruth Reader of Fast Company reported that the company’s first quarter revenue rose 110 percent:

The company’s revenue reached $342 million in the first quarter of 2018, up 110% from the period before, according tomemo obtained by Fast Company. The company now has 220,000 members, a foothold in 73 cities, and an annualized run-rate of $1.5 billion based on March revenues.

It’s not just membership that’s on the rise. WeWork is also increasing occupancy. Buildings are now 82% full, up from 73% a year ago. It’s enterprise offering, wherein WeWork builds and operates workspaces for bigger corporate clients, represented 24% of total memberships in Q1.

But WeWork also loses a lot of money, as learned from its bond sale earlier this year. In 2017, the company brought in sales of $886 million and losses of $933 million, according to its prospectus.

Dan Primack of Axios reported that the most important number was WeWork’s 82 percent occupancy rate:

But perhaps WeWork’s most important quarterly number doesn’t have a dollar sign in front of it. That would be an 82% occupancy rate at the end of March, which is up from 73% from one year earlier despite the company’s rapid expansion (33 additional cities and nine new countries).

• Why it matters: WeWork would argue that this demonstrates that it has figured out how to scale, in part due to an increased ability to land enterprise customers who sign longer-term contracts (now 24% of total membership, up from 14%).

WeWork didn’t mention the new private fundraise in its memo, but the beans were spilled at a conference in London by SoftBank’s Rajeev Misra. Expect it to be a combination of primary and secondary capital, so as to better protect against dilution. Spokespeople for both WeWork and SoftBank declined to comment on Misra’s disclosure.