WeWork is said likely to delay IPO after valuation plummets

Daniel Fowler
September 20, 2019

"We is now expected to wait until mid-October at the earliest to start its investor roadshow following the conclusion of the Jewish High Holidays, which Mr. Neumann observes", reports the Wall Street Journal (paywall), adding that "some existing investors, including SoftBank, have pushed the company to wait until next year to launch its IPO". But investor sentiment, already souring, turned overwhelmingly negative when WeWork released its IPO prospectus, despite more recent efforts to soothe concerns about its business model and corporate governance.

Among the high-profile IPOs of the year - Uber (UBER), Lyft (LYFT), Slack (WORK) and Pinterest (PINS) - none have seen gains except for the latter, but none also had as hard of a time going public as WeWork (WE) (officially labeled "The We Company", but more commonly known by the name of its original flagship brand).

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.

Reuters reported last week that the company was seeking a valuation in its IPO of between $10 billion and $12 billion, a dramatic discount to the $47 billion valuation it achieved in a private round in January. Still, the value of WeWork's bonds sunk the most on record Tuesday on concerns that the cash-burning company will miss out not only on the more than $3 billion it planned to raise in the offering, but also a $6 billion credit facility tied to a successful IPO. But even with the backing of it's biggest supporter, Japan's SoftBank Group Corp, which planned to spend between $750 million and $1 billion on shares, the company said Monday it would only raise around $2 billion.

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The company's $669mn of bonds due in 2025 dropped as much as 7.3 cents on the dollar to 95.5 cents yesterday in NY, according to the Trace bond-price reporting system.

The delay will give advisers more time to drum up interest and may allow the company to show investors another quarter's worth of results.

In a filing on Friday with the US Securities & Exchange Commission, the company said it hoped to trade under the stock symbol "WE". Further, it would re-organize its shares in a way that would reduce Neumann's voting power, though he would still control a majority of its outstanding voting power.

As per sources, Neumann will share all the profits he receives from real estate deals between him and the firm. The CEO has an upper limit of selling only 10% of his shareholdings in the two years following WeWork's IPO. This provision is now eliminated, and there'll be no members of the chief's family on the company's board. However, the company addressed the situation Monday night, issuing a statement saying it plans to complete its IPO by the end of the year. This month, WeWork's chief communications officer, Jennifer Skyler, left after almost four years, an exit preceded by Dominic McMullan, vice president of communications, who departed in July.

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