WeWork owner pushes back IPO amid investors concerns over governance

The owner of WeWork was forced into an embarrassing postponement of its Wall Street initial public offer overnight, less than a week before they were due to be listed.

We Company, the parent company of the flexible office space platform said on Monday that it now plans to complete its IPO by the end of the year, having filed a prospectus last month and been aiming to price its shares next week.

READ: WeWork owner IPO valuation could fall below $20BN, while some investors are pushing it to shelve planned offering: reports

“The We Company is looking forward to our upcoming IPO, which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment,” was all the company said in a statement.

Key institutional investors had raised concerns about corporate governance, including the unbalanced influence of co-founder and chief executive Adam Neumann over the company, as well its rising losses and the sustainability of its business model, according to media reports. 

The flotation was expected to raise US$3bn-US$4bn, but the company reportedly slashed its anticipated market valuation to US$10bn-US$12bn from the US$47bn calculated in January.

We Company has so far raised $12.8bn in equity since it was founded in 2010, much of it from SoftBank Group Corp. The Japanese technology giant has invested or committed to invest $10.65 billion in the company – which was rebranded from WeWork earlier this year – since 2017.

New York-based We Company, which rents out workspace to clients under short-term contracts, reported a loss of more than $900 million in the first half of 2019, up 25% from a year earlier, even as its revenue doubled to $1.54 billion.

WeWork has missed the boat

Michael Hewson, chief market analyst at CMC Markets UK commented: “It would appear that WeWork has missed the boat when it comes to getting investors to buy into an idea that has yet to prove profitable.

“Today’s decision to defer the launch of its much anticipated IPO appears to be borne out of concern that its valuation is still way too high, as well as concern over its governance structure, and the financial linkages with its CEO Adam Neumann. “

He added: “The S1 filing issued last month should have been the opening salvo that began a roadshow that would convince investors to generate between $2bn to $3bn of extra funding, at a time when the IPO flurry that we saw at the beginning of this year appears to have run its course.

“The reality has been somewhat different and while other unicorns like Uber, Lyft and Slack appear to have been given the benefit of the doubt it would appear that as far as WeWork is considered investors have decided it doesn’t work.”

 – Adds analyst comment –

Story by ProactiveInvestors