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WeWork delays IPO after frosty investor response: All you need to know

The US office-sharing start-up 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

Joshua Franklin & Anirban Sen | Reuters  |  New York/Bengaluru 

WeWork office
WeWork office

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

The US office-sharing start-up 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.

In the run-up to the IPO launch, We Company has faced concerns over 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.

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

“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,” the company said in a short statement.

Had the firm proceeded with the IPO at such a low valuation, it would have represented a major turning point in the growth of the venture capital industry over the last decade. The VC universe has led to the rise of start-ups such as Uber, Snap and Airbnb.

It would have meant that We Company would be valued at below the $12.8 billion in equity that it had raised since it was founded in 2010, according to data provider Crunchbase. This would have been a blow to its biggest backer SoftBank Group at a time when it is trying to amass $108 billion from investors for its second Vision Fund.

SoftBank was discussing supporting the IPO by snapping up shares worth between $750 million and $1 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 $2 billion, short of its target of at least $3 billion.

This target is tied to a $6-billion credit line that 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 $3 billion, one of the sources said.

Were the New York-based company to fail to meet this target by the end of the year, it would need to secure alternative funding.

The Wall Street Journal first reported on the potential IPO delay.

The sources who spoke to Reuters requested anonymity because the matter is confidential.

The last time SoftBank invested in We Company was in January at the $47 billion valuation, injecting $2 billion of cash. It had been pushing the company to delay its IPO.

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

GOVERNANCE CHANGES

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.

We Company had said it was making the changes "in response to market feedback". It said Neumann's superior voting shares will decrease to 10 votes per share from 20, though he will retain majority control of the company.


First Published: Tue, September 17 2019. 22:59 IST
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