WeWork presses on with IPO
September 11, 2019 - September 16, 2019 - Office-rental company WeWork – now rebranded as The We Company – may seek a valuation as low as $15 billion to $18 billion in an initial public offering, down from the $47 billion value in January.
WeWork’s valuation comes from Japan’s SoftBank and the Saudi-backed Vision Fund, which has invested $10.65 billion in WeWork since 2017. SoftBank would have to write down the value of its investment should the IPO go ahead at a lower valuation.
Further financing from the Vision Fund, has been rumoured. A $2 billion investment from SoftBank in January valued the company at $47 billion -- exceeding SpaceX, Elon Musk’s space technology company, valued at $33.3 billion.
Last year WeWork’s revenue more than doubled from $886 million in 2017 to $1,821 million. Unfortunately, costs are growing just as steeply, WeWork burnt through $3.5 billion in cash in 2018.
WeWork’s steep valuation is only justified if it can prove that it is far more than a provider of flexible office space. Its profitable workspace peer, International Workplace Group (IWG), has an equity valuation of just $3.8 billion.
IWG is the world’s largest serviced office provider with almost 2.5 million users in more than 1,000 cities in 110 countries. In comparison, WeWork has some 400,000 users in 111 cities in 32 countries.
WeWork’s ultimate valuation will be up to investors. Whether it follows Uber in the ride-share giant’s footsteps -- which has lost about 27 per cent of its value since going public -- remains to be seen.
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