WeWork cancels IPO

WeWork has pulled out its application for an initial public offering amid internal chaos.

Alexandra Olson and Stan Choe had the news for the AP:

WeWork’s new leaders shelved plans to enter the stock market Monday as they sought to repair the battered image of a company that appeared to revolutionize the office-rental industry and was poised just weeks ago to go public with a valuation of nearly $50 billion.

The decision came less than a week after co-founder Adam Neumman stepped aside as chief executive officer. His corporate governance practices had raised conflict-of-interest questions that compounded skepticism about the money-losing company’s prospects for turning a profit.

The suspended IPO raised an immediate funding challenge for WeWork, which had counted on a successful stock offering to pursue the meteoric growth strategy that made it so attractive to private investors in the first place. The company, which began as a co-working space in Manhattan in 2010, had planned to expand in many of the 111 cities where it now operates and launch in up to 169 additional cities across the world.

Analysts have said WeWork’s outlook could improve if it raised cash and slowed its growth to conserve capital, even though that would lower its long-term value. Its revenue has more than doubled each year since 2016, mostly through its acquisition of new property leases.

Anirban Sen reported for Reuters:

WeWork’s parent The We Company on Monday filed to withdraw its initial public offering, a week after the SoftBank-backed office-sharing startup ousted founder Adam Neumann as its chief executive officer.

The company’s high-yield bond price slid to a record low after the move was announced earlier in the day.

The scrapping of the IPO marks the conclusion of a tumultuous few weeks for the office-sharing firm, which failed to excite investors who raised concerns about its burgeoning losses and a business model that involves taking long-term leases and renting out spaces for a short term.

Furthermore, experts pointed out that removing Neumann from the CEO role and addressing governance issues were not enough, and that such a business model was unlikely to thrive during an economic downturn.

According to the IPO prospectus it filed earlier in September, We Company had cash and cash equivalents of roughly $2.5 billion as of June 30. However, while revenue doubled to nearly $1.8 billion in 2018, its losses also more than doubled to $1.9 billion.

CNBC’s Annie Palmer quoted co-CEO Artie MInson as saying:

“We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong,” WeWork co-CEOs Artie Minson and Sebastian Gunningham said in a statement Monday. “We are as committed as ever to serving our members, enterprise customers, landlord partners, employees and shareholders. We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future.”

Following Neumann’s resignation, WeWork’s new CEOs have taken steps to cut costs at the company, including selling Neumann’s private jet, putting side businesses up for sale and considering layoffs of up to one-third of the company’s workers, or roughly 5,000 employees. The steps are widely being viewed as an effort to get the company back on track for an IPO, though it remains unclear when a public offering would take place.