WeWork Files for IPO
Shared-office-space giant WeWork Cos. has added its name to the slew of highly valued startups heading to the public markets, a surprise move that will test the company’s rich valuation and heavy spending.
WeWork, which rebranded as the We Company early this year, said it filed confidentially for an initial public offering in December, not long before it was valued at $47 billion by Japanese technology investor SoftBank Group Corp.
That investment put WeWork’s valuation at second among U.S. venture-capital-backed companies to ride-hailing company Uber Technologies Inc., which plans to hit the public markets next month at a value of as much as $90 billion. WeWork is also the latest in a string of IPO candidates with large losses. The nine-year-old New York-based company reported a loss last year of $1.9 billion on revenue of $1.8 billion.
The public markets would mark a huge test for WeWork, which has long attracted scrutiny from landlords, analysts and many tech investors for its lofty valuation assigned by private investors, especially when compared with real-estate companies in similar businesses. WeWork is primarily focused on real estate, renting long-term space, renovating it, then dividing the offices and subleasing them on a short-term basis to other companies. Chief Executive Adam Neumann and his deputies have said investors should treat WeWork more akin to a tech company, pointing to its rapid growth and various services it eventually hopes to offer that cater to its tenants.
It is also aided by strong demand from a generation of young workers and large companies seeking hipper offices and which laud its avant-garde design and offerings like kombucha on tap.
WeWork will likely make its debut this year, a person familiar with the offering said, in what is expected to be the biggest year ever for public offerings by dollars raised. Uber is planning to go public next week in one of the largest U.S.-listed IPOs on record, following the debuts of Lyft Inc., Pinterest Inc. and Zoom Video Communications Inc.
The decision by WeWork to file for an IPO caught many observers and even some investors by surprise. The company took the unusual step of filing without assistance from bankers, the person said.
The executives plan to start meeting with investment banks in the coming weeks to have them pitch for roles in the deal. WeWork’s executives began compiling the confidential filing late last year at the same time they were discussing with SoftBank the possibility of the fund taking a majority stake in the company, the person said.
SoftBank was considering investing as much as $16 billion into the real-estate company—$6 billion of new money and $10 billion to buy shares from existing investors.
If that investment had gone through, it could have made an IPO unnecessary for years. But the deal dissolved after some of SoftBank’s investors balked, and the firm instead invested $1 billion directly in WeWork and bought another $1 billion of existing shares.
“We have regularly focused on how to take our business to the next level in every aspect,” Mr. Neumann told employees on Monday in a note reviewed by The Wall Street Journal. The December IPO filing was made “as part of keeping all options open,” he said.
Investors will likely challenge WeWork over how it is different from other real- estate companies that employ similar business models at a fraction of the valuation. For instance, WeWork’s revenue last year was a bit more than half of that of IWG PLC, a slower-growing company which runs shared office space companies Regus and Spaces. But its valuation is more than 11 times that of IWG’s roughly $4 billion.
WeWork’s losses have generally been increasing at the same rate as its revenue—roughly doubling each year. WeWork says its losses are largely due to its heavy investment in future offices, which it has said have healthy profits once they are well-leased.
The company said as of December it had more than 400,000 members who rented desks in 100 cities, and it has increasingly signed up larger corporate clients, who make up about one-third of membership.
Powering WeWork’s business thus far has been billions in capital, principally from SoftBank and its tech fund. Since it started with just a single Manhattan office space in 2010, the company has raised nearly $10 billion in from investors and lenders, according to PitchBook.
Filing for an IPO confidentially enables startups to keep their offering documents private and out of the hands of competitors while they are reviewed by the Securities and Exchange Commission. The IPO filing typically becomes public within weeks of a planned stock-market listing.