WEWORK AT THE STARTING GATE – CORPORATE

WeWork, the 9-year-old real estate company, which is scheduled to be hence-forth known as “We Company” or “We” has generated initial paperwork for its IPO.

The details show that from 2016 to 2018, the company quadrupled its revenue, to $1.82 billion, and generated a loss of $1.61 billion.  And, in recent months, from January to June of 2019, the company generated $1.54 billion in revenue, with a net loss of $689.7 million.  And, according to the WSJ, the filing also describes the atypical relationship that the company has with co-founder and CEO Adam Neumann that includes his personal loans and real-estate transactions with the firm (see previous posts that discuss this area in more detail).  We’s public filing would allow it to initiate IPO action in September.  The real-estate company primarily rents long-term space, then renovates to divide into offices that are sub-leased to other companies.  The company, which is sometimes described as “quirky,” has often contended that it should be referred to as a technology company rather than a traditional real-estate firm.  Most, reading this post, would probably agree with that synopsis. The filing explains that We operates in 528 locations in 111 cities around the world, with 527, 000 memberships able to work in those offices.  The company’s growth has come at a steep cost, causing it to keep up with swift expansion by necessitating the raising of large sums of money.  For the deal to be finalized, a number of banks, including JP Morgan Chase and Goldman Sachs, have committed to providing additional funding of up to $6 billion in debt that would close at the time of its IPO.  The banks are said to be requiring that We still raise $4 billion in the public equity market to fund its growth.  The deal would also require that We hold at least $2.5 billion and up to $3.5 billion in cash in the next several years.  The WSJ’s thinking on the issue is that, “Increasing losses, murky financial metrics, and touchy-feely sales pitches are hallmarks of the recent IPO boom; WeWork brings them together in one offering.”  We’ll follow the progress toward IPO filing with interest.

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