WeWork Brings IPO Forward To September
WeWork, the privately held co-working juggernaut that last year became central London’s biggest single office tenant, is to go public in September. While the company itself is yet to make any official announcement, reports are confident that the IPO date is being brought forward, with late autumn or spring 2020 previously anticipated. However, with strong market conditions holding for now, WeWork has reportedly decided to strike while the iron’s hot and join the stream of mega 2019 IPOs.
The company was valued at $47 billion during its last major private investment round and hopes to at least maintain that valuation during an IPO, preferably improving on it. The IPO is reportedly targeting a stock sale worth $3.5 billion, which, if achieved, would make it the year’s second largest initial public offering – second only to the $8.1 billion raised by Uber. At a market capitalisation of $47 billion +, WeWork would become one of the most valuable companies ever at market debut.
WeWork has taken the co-working office-leasing business model that boomed after the financial crisis onto another level. Originally catering to freelancers or start-ups on a tight budget, co-working spaces originally sprang up in cheap properties in convenient or ‘hip’ locations. They were often tenantless former industrial premises or down at the heel offices. Interior designs tended towards the ‘hipster’ and were generally also done on a tight budget.
WeWork’s approach is a little different. It takes over high class office premises, often Class A, on long term leases and turns them into the kind of high-end co-working premises that have tenants ranging from freelancers to small law or accountancy firms. Contracts can be for simply a hot desk in a common co-working area with access to meeting rooms and call booths, a fixed desk or small office. Interior design keeps something of the ‘hipster’ trend but is certainly not done on a budget. The feel of a WeWork building is more like what would be expected for the office of a well-funded Silicon Valley tech start-up than a Hackney design studio from the late noughties.
Founded in New York in 2010, WeWork now runs office spaces in 27 countries and has almost half a million ‘member’ contracts. London has been a particular focal point city for the company, which leases over 3 million sq. ft. in the capital.
WeWork is also in the process of finalising a $6 billion asset-backed loan that will mean the amount it needs to raise through an IPO will be reduced. It is hoped this will reassure investors the company has enough of a cash reserve to have to raise money again in the next few years, which would be expected to dilute shares sold through the IPO. WeWork is burning through cash quickly as it expands aggressively, though the company insists that it could, if it chose, turn a profit within a month if it halted capital expenditure. The company made a $1.9 billion loss last year.
Investment professionals are very much split on the fair value of WeWork. It has been raising money at valuations that are comparable to quickly growing tech companies. Sceptics insist behind its PR and strong marketing it is little different to a serviced offices provider like Regus or a commercial property REIT. Companies in these categories are generally assigned much more conservative values by the market and naysayers believe that sooner or later WeWork’s fashionableness will wear off and its value move towards that which would be expected for a commercial property company.
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