Loss-making WeWork eyes big IPO and looks to borrow billions
Unconventionally, the office-rental company will have three classes of common stock, after a net loss of $690m in the first half of 2019
New York — WeWork has disclosed its plans for an initial public offering (IPO), revealing a net loss of $690m in the first six months of 2019 as it moves towards an autumn listing that will test investors’ appetite for money-losing startups.
Revenue in the first-half more than doubled to $1.54bn, the US Securities and Exchange Commission (SEC) filing showed. The company plans to list shares under the symbol “WE”, although the exchange was not listed.
One of the main risk factors the company highlighted on Wednesday is its “ability to achieve profitability at a company level in light of our history of losses”.
CEO Adam Neumann faces persistent questions about WeWork’s propensity to burn cash. The company has described some of its more scrutinised expenses, including a flashy contest series that cost more than $40m, as “critical means through which we express our key values”.
In an unconventional move, there will be three classes of common stock at WeWork: Class-A shares with one vote each, plus “high-vote stock” in the form of Class-B and Class-C shares.
The office-rental company listed an offering size of $1bn, which is typically a placeholder that will be revised when the terms of the share sale are set later. WeWork had been targeting a share sale of about $3.5bn in September, people familiar with the matter have said. That would make it the second-biggest IPO of the year, topped only by Uber Technologies’s $8.1bn listing in May. In parallel with the stock offering, WeWork has been in talks to raise as much as $6bn in debt.
JPMorgan Chase and Goldman Sachs will be the lead underwriters on the IPO. Executives from major banks have been courting the company for years.
WeWork’s annual revenue more than doubled to $1.8bn in 2018 compared to $886m in the previous year. The full-year net loss attributable to the company widened more than 80% to $1.6bn, from a loss of $883.9m in 2017. It lost about $430m in 2016.
The company said it could one day be profitable if it “stopped investing in our growth and instead allowed our existing pipeline of locations to mature”. WeWork said only 30% of its open locations are mature and that 70% of its locations have been open for two years or less. It also has a revenue backlog of $4bn, eight times its backlog last year, it said.
New York-based WeWork, which leases office space to companies and freelance workers, has raised more than $12bn in funding since its founding. SoftBank Group is the company’s largest backer and has valued the unprofitable business at $47bn. WeWork is by far the most valuable co-working business, though numerous rivals around the world are trying to lure away members.
WeWork — which changed its name to The We Company in a diversification move earlier this year — has, in recent weeks, been looking to raise a significant amount of debt. It was seeking to borrow $2bn through a letter-of-credit facility and $4bn from a delayed-draw term loan, Bloomberg previously reported.
Banks will have to make good on their commitments only if at least $3bn is raised in the IPO. It confirmed in the filing that it entered into a commitment letter this month for a credit facility of as much as $6bn.