WeWork parent eyes valuation below $20B amid investor skepticism
WeWork’s parent company, We Company, is eyeing a dramatic drop in its initial public offering forcing existing investors to consider shelving the plans altogether, according to The Wall Street Journal, citing sources familiar with the matter.
The office-sharing company’s highly anticipated IPO could fall below $20 billion -- a dramatic drop from its $47 billion valuation of which was raised through private capital this year. This comes at a time when IPO demand is surging for companies who show they are on a path to profitability, according to the Journal, adding that the roughly 50 percent drop in valuation would hurt investors who have given or committed to over $10 billion to the company.
The company, built on the concept of shared workspace since it was founded in 2010, filed paperwork in August to go public.
The We Company and its underwriters plan to hold meetings as soon as this week with investors in order to address garnering enough demand for an IPO and what changes may be needed in order to do so, sources told the Journal.
While CEO and co-founder Adam Neumann’s decision to sell hundreds of millions of dollars of his stock and loans tied to his shares in the company left some investors scared, it hasn’t shaken them all. According to the Journal, some investors indicated interest in the IPO, giving the company the potential to pull off a valuation of $20 billion or higher.
However, skepticism with the company also lies within its governance and business model as well as its ability to turn a profit while continuing to grow, the Journal says.
If the IPO gets postponed, it stands to lose out on the $10 billion needed to fund its plans for global growth. If the IPO doesn't happen, the company will quickly face pressure to scale back plans for further growth or it will have to quickly raise capital, sources familiar with the matter tell the Journal.
The company's biggest investor, SoftBank Group Corp., is in talks with the company about whether it will be willing to offer "additional capital through the IPO by buying a significant portion of the shares on offer or invest a chunk of money that would allow We to delay its IPO until 2020," according to the Journal.
There is no word yet if the Japanese technology giant will put additional funds into the company, though sources told the Journal that some key investors may be reluctant to do so.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| SFTBY | SOFTBANK GROUP CORP. | 28.8 | +0.80 | +2.86% |
WeWork and SoftBank declined FOX Business’ request for comment.