NEW YORK – WeWork’s parent is expected to postpone its initial public offering after investors questioned how much the company is worth and raised concerns about its corporate governance.
The shared-workspace company – which had planned to begin a roadshow to market the shares as early as Monday ahead of a trading debut next week – is likely to shelve the offering until at least next month, people familiar with the matter said.
The move reflects the difficulty the company, along with its co-founder and chief executive, Adam Neumann, have had getting the offering off the ground, even after dramatically slicing its valuation and revamping its governance.
It is a blow for a company that had been one of the most richly valued of a raft of startups planning to go public in a banner year for IPOs, but has been dogged by doubt over whether it can thrive as a public company.
We Co. – as the company is officially known – had been valued at $47 billion in a fundraising exercise this year with SoftBank Group, but in recent days its executives and underwriters had become resigned to something closer to between $15 billion and $20 billion or possibly lower, people familiar with the matter said.
The company also spelled out a series of governance changes, including adding a lead independent director and ratcheting back the potency of Neumann’s supervoting rights.
Still, those changes don’t appear to have assuaged investors who questioned Neumann’s outsize control and the hundreds of millions of dollars he has reaped from selling his shares and other transactions with the company.
Investors have also been unnerved by deepening losses at the company, which last year bled $1.61 billion in red ink – nearly equal to its revenue of $1.82 billion.
Another factor complicating the offering is the disappointing debut of SmileDirectClub, a teeth-straightening startup that fell 28 percent on its first day of trading last week. It was the year’s worst stock-market debut for a US company valued at more than $1 billion, according to Dealogic, and that spooked some big IPO investors.
We is now expected to wait until mid-October at the earliest to start its investor roadshow following the conclusion of the Jewish High Holidays, which Neumann observes.
The delay could also last longer and some existing investors, including SoftBank, have pushed the company to wait until next year to launch its IPO, The Wall Street Journal has reported.
The nine-year-old company, which rents space, renovates it, then divides it up and subleases it, expects that results for the current quarter will showcase its rapid growth and get investors more excited about its prospects, one of the people said.
That would enable the company to stage its long-anticipated debut as soon as October or November, this person said, adding that We had all along been considering this alternate timetable among others.
The offering has been full of unexpected twists and turns and it is still possible the company could decide to move forward on the original timetable.
If the IPO doesn’t take place soon, We may have to look elsewhere for much-needed funding.
The share sale was expected to raise at least $3 billion and trigger a $6 billion loan package.
One possible source of new funding is SoftBank, WeWork’s largest investor, which was planning on kicking in at least $750 million more as part of the IPO, as the WSJ reported last week.
SoftBank’s planned investment was expected to help shore up demand for the offering by limiting the supply of shares to be sold to outside investors and signaling the Japanese technology conglomerate’s continued support of the company, but apparently that didn’t do the trick.
The postponement is the latest hiccup for the IPO market in a year that is set to be one of best ever in terms of money raised in new issues.
A number of big technology startups, including ride-hailing services Uber and Lyft and workplace-messaging provider Slack, have gone public in 2019 and while some of the newly minted shares have soared, others, such as Lyft and Uber, have struggled as investors question businesses with big losses.