WeWork shelves IPO

WeWork shelves IPO

20 September 2019

WeWork owner The We Company has postponed its initial public offering (IPO), walking away from preparations to launch it this month after a lacklustre response from investors to its plans.

The U.S. office-sharing startup was getting ready to launch an investor road show for its IPO this week before making the last-minute decision on Monday to stand down, people familiar with the matter said.

The company has been under pressure to proceed with the stock market flotation to secure funding for its operations.

Reuters reported last week that We Company might seek a valuation in its IPO of between $10 billion and $12 billion, a dramatic discount to the $47 billion valuation it achieved in January.

It would have meant that We Company would be valued at less than the $12.8 billion in equity it has raised since it was founded in 2010, according to data provider Crunchbase. And it would have been a blow to its biggest backer, Japan’s SoftBank Group Corp.

SoftBank was discussing supporting the IPO by snapping up shares worth between $US750 million and $US1 billion, the sources said. However, We Company decided on Monday that even with SoftBank’s support, the IPO would have raised a little over than $US2 billion, short of its target of at least $US3 billion.

This target is tied to a $US6 billion credit line We Company secured from banks last month, that calls for an IPO to take place by the end of the year and raise at least $US3 billion, one of the sources said.

The last time SoftBank invested in We Company was in January at the $US47 billion valuation, injecting $US2 billion of cash. It had been pushing the company to delay its IPO.

JPMorgan Chase & Co and Goldman Sachs had been tasked with leading We Company’s IPO as underwriters.

We Company’s decision to delay its IPO indicates it did not feel confident that the corporate governance changes it unveiled on Friday, slightly loosening CEO and co-founder Adam Neumann’s grip on the company, was enough to woo investors concerned about its lack of a path to profitability.

In the run-up to the launch of its IPO, We Company has faced concerns about its corporate governance standards, as well as the sustainability of its business model, which relies on a mix of long-term liabilities and short-term revenue, and how such a model would weather an economic downturn.