We(Still)Don’tWork: WeWork’s initial public offering withdrawn after lacklustre investor response

October 2, 2019

2 min read

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What's going on here?

WeWork owner, the We Company, has formally withdrawn its plan for an initial public offering (IPO).

What does this mean?

WeWork had planned to list on the New York Stock exchange (for our article on that, see here) but, on Monday 30th September, made the last-minute decision to stand down. This was due to a disappointing response to the listing from investors. Since then, it has wholly withdrawn its application to list on the Nasdaq stock market.

WeWork is an office-sharing company, which operates globally to lease office space to professionals, small businesses, and even Fortune 500 companies. The company was under pressure to proceed with its stock market flotation to secure funding for its operations.

What's the big picture effect?

In the run-up to the launch of its IPO, the company appeared to be falling apart. It faced concerns about its corporate governance standards, as well as the sustainability of its business model. It just so happened that these concerns materialised to the point that the company did not list. Had WeWork been listed, it would have been a significant stunt in the growth of the venture capital industry over the last year, which has led to the rise of other startups such as Snapchat and Airbnb.

WeWork’s biggest backer, Japan’s SoftBank Group Corp, had discussed supporting the IPO by purchasing shares worth up to $1 billion. The last time SoftBank invested in the We Company was in January at a $47 billion valuation; however, it was reported that We Company might seek a valuation in its IPO of up to only $12 billion. Consequently, SoftBank was pushing the company to delay its IPO, as they would have suffered a tremendous blow. In any case, We Company decided that even with SoftBank’s support, the IPO would have raised slightly over $2 billion- $3 billion short of its target. This target is tied to a $6 billion credit line secured from banks last month, which would have been granted on the condition that the IPO must take place before year-end and raise at least $3 billion. We Company is now in talks to renegotiate a $1.5 billion cash injection from SoftBank.

We Company’s decision to withdraw its IPO indicates it does not feel the corporate governance changes they announced on Friday were sufficient to attract investors; investors who were already concerned about its lack of profitability. The company had hoped to reinvigorate the interest of investors by the end of the year, but following opposition from SoftBank, and a series of poorly received listings, they have been forced to conclude that no IPO will be possible in 2019. Ultimately, WeWork will need to reduce its losses and revamp the business before making a new attempt at a public market listing.

Report written by Sarina Johal

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