Unicorn startup WeWork has decided to shelve its much awaited IPO amid subdued investor interest in the firm even as valuations plummet. “The We Co. is looking forward to our upcoming IPO, which we expect to be completed by the end of the year,” the firm said in a statement. Notably, developments around WeWork’s proposed public offer has grabbed eyeballs, as the IPO would have been the biggest after ride-hailing giant Uber’s $8.1 billion listing earlier this year. WeWork’s valuations have plummeted from about $47 billion in early 2019 to less than $15 billion now, according to a recent Bloomberg report. At the start of the year in In January, Japanese-major SoftBank made its last investment in WeWork, renamed the We Co at a valuation of $47 billion. The company was more recently expected to be valued at only about $15 billion in a listing and perhaps even less, Bloomberg reported citing sources with knowledge of the matter. We take a look at why WeWork’s delayed IPO continues to remain in focus.
Mounting losses and plummeting valuations
The main reason behind plummeting valuations are the firm’s billion dollar losses. WeWork lost whopping $1.6 billion last year. The company, which was highly reliant on the IPO to raise capital saw its bonds decline by most following the news of IPO delay. In just the first six months of 2019, WeWork lost $690 million, bringing its total losses to almost $3 billion in the past three years, as per the firm’s filings.
Corporate Governance lapses
Investors are also worried about issues related to corporate governance in WeWork. The firm’s filings revealed that WeWork had paid rent and spent $5.9 million to acquire a trademark owned by its founder Adam Neumann. The IPO papers have revealed that Neumann borrowed $7 million from WeWork at a favourable annual interest rate of 0.64%. Notably, he paid it back in November 2017, with about $100,000 in interest. “From time to time over the past several years, we made loans directly to Adam or his affiliated entities,” WeWork wrote in the filing. In recent months, WeWork has sought to address some of its governance issues, by adding a women director to its board, after the firm made news for having an all-male board.
WeWork’s bonds posted a record plunge yesterday after the news of IPO delay, as investors were worried that the company would no longer be able to raise the planned $3 billion in equity, and an additional $6 billion credit facility tied to a successful IPO. WeWork must carry out the offering by Dec 31 to get the loan, Bloomberg previously reported.
WeWork in India
With this delay, the firm’s proposed $2.75 billion deal also remains incomplete. Earlier, WeWork had offered to pick up a 70% stake in WeWork India in a cash and stock deal valued at $2.75 billion, about three years after its entry through a brand franchise agreement. Embassy Buildcon Llp, the holding company of WeWork India that is owned by Embassy Group chairman Jitu Virwani, would hold the remaining 30% stake once the deal goes through, according to a report by Livemint. India remains one of WeWork’s fastest-growing markets, with 35,000 seats in more than 20 shared locations 18 months after launch. It hosts companies such as Microsoft Corp and Amazon.com Inc. in Bangalore, and Spotify Technology SA and Bumble in Mumbai.