WeWork cancels its IPO
WeWork’s parent company, The We Company, said Monday that it will file an application to withdraw its IPO prospectus. This comes a week after the SoftBank-backed startup ousted founder Adam Neumann from its CEO..
The abandonment of the IPO prospectus formalizes the end of the New York company’s bid for listing in the near term and allows Neumann’s successors to embark on a financial turnaround without public disclosure.
The decision to abandon the IPO marks the end of a turbulent several weeks for a coworking company that has failed to attract investors, worried about its growing losses and a business model of long-term leases and short-term office space..
In addition, experts noted that removing Neumann from the CEO position and addressing management problems is not enough, and that such a business model is unlikely to flourish during an economic downturn..
We Company had approximately $ 2.5 billion in cash and cash equivalents as of June 30, according to an IPO prospectus that was presented earlier in September. However, while revenue doubled to nearly $ 1.8 billion in 2018, its losses also more than doubled to $ 1.9 billion..
The decision to withdraw from the public offering will also put pressure on WeWork to provide alternative funding, given that the $ 6 billion loan deal with banks last month is contingent on a successful sale of at least $ 3 billion in shares. Analysts predict that WeWork will spend billions of dollars in the next few years, and therefore needs to continue to raise new funds with favorable estimates.
According to Reuters sources, the company is currently seeking to downsize its staff and slow down expansion to save more money and be less dependent on new funding sources..
The company is negotiating to attract new sources of financing from investors, including SoftBank Corp.
SoftBank, which pushed WeWork to postpone its IPO and is currently trying to create a second Vision Fund worth more than $ 100 billion, is under pressure. The fund needs to reassure its key sponsors who have raised concerns about the long term viability of the investment fund.
However, the decision to exit the IPO was not unexpected. This was expected after the company postponed the sale of shares in early September. Then potential investors were skeptical about the company’s prospects due to growing losses and Neumann’s unusually strong control over this business..
«We decided to postpone the IPO to focus on our core business, the fundamentals of which remain strong», – WeWork’s newly appointed CEOs Artie Minson and Sebastian Gunningham said on Monday.
«We are fully committed to working with WeWork as a public company, and we look forward to returning to the open market in the future.», – added by Minson and Gunningham.
SoftBank, which owns nearly a third of We Company, has invested $ 47 billion in the startup. But investor skepticism has led to a potential IPO valuation of just $ 10 billion.
The company has pledged to hold an IPO and complete the sale of the shares by the end of the year after Neumann steps down as CEO. However, Reitenre sources believe the IPO is unlikely to be completed this year..
WeWork’s failed IPO marks a tough time for startups that have gone public in recent weeks. US entertainment and talent agency Endeavor Group Holdings IPO last week, and Peloton Interactive Inc, a fitness startup known for its on-demand workout programs on its stationary bikes, dropped 7% in its market debut..
Earlier in September, teeth straightening company SmileDirectClub Inc opened with a disappointing debut.
Public companies Uber Technologies Inc and Lyft Inc also released upbeat forecasts this year, but their shares have since tumbled after investors worried about their sharp losses..