In 2017, WeWork CEO Adam Neumann (left) told Forbes, “Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.” The company was last valued at 26-times 2018 revenue.
Jamel Toppin For Forbes
WeWork released its Form S-1 on Wednesday, officially starting the clock on what is expected to be one of the largest public offerings of the year.
The New York-based shared-office startup had announced in April that it had confidentially registered with the Securities and Exchange Commission to go public. The filing lists the offering size as $1 billion, a common placeholder before deal terms are set. The company is said to be looking to sell $3.5 billion worth of stock.
The SEC filing confirms that CEO Adam Neumann will control at least 50% of voting power after the offering. Forbes last estimated Neumann’s stake to be worth $4.1 billion and his cofounder’s, chief culture officer Miguel McKelvey, at $2.9 billion.
However, with a $6 billion infusion from SoftBank having valued WeWork at $47 billion in January, the lofty valuation that makes the men so rich may be hard to defend to public investors.
Currently, WeWork’s value is 26 times its 2018 revenue. Boston Properties, one of the nation’s largest owners of urban office space, is valued at around 12 times revenue. (Former Boston Properties chief Mortimer Zuckerman was an early investor in WeWork.) IWG, the parent company of shared office competitor Regus, is valued at less than four times revenue.
Markets have not been kind to recent high-profile IPOs with large private valuations and no profits. Three months after its offering, ride-hailing giant Uber is trading at a valuation below its last private funding round. Lyft’s shares are down more than 25% since its March debut.
Like these other recent market entrants, WeWork is going public while still realizing steep losses. It had previously disclosed a loss of $1.9 billion on 2018 revenue of $1.8 billion. The new filing shows a $905 million loss in the first six months of this year on $1.54 billion in revenue. Revenues doubled from the same period a year earlier, while losses increased 25%.
The company says that individual locations older than two-years make money, indicating that it could achieve a companywide profit if it stopped investing in growth. Of 527 total locations, 103 have opened in 2019.
Founded in 2010, WeWork has a laid-back look, kombucha taps and an emphasis on community, offering a fresh perspective on an old business model: leasing space from building owners, subleasing it in smaller pieces and pocketing the spread. Locating in a WeWork space means a client-business doesn’t have to worry about installing internet, staffing a mailroom or providing coffee, so WeWork can upcharge for ease and flexibility.
With 527,000 members, the concept has proved popular. However, some New York office brokers say a large WeWork presence may hurt a building’s resale value since the business has not been tested in an economic downturn. On the other hand, a few large office owners have invested in WeWork, and some are opening co-working spaces of their own. WeWork has started purchasing properties, such as the Lord & Taylor flagship store in New York, but the vast majority of its spaces are leased.
Early this year, the cofounders formed an umbrella organization called The We Company, which encompasses the main co-working business and a three-year-old co-living brand called WeLive. There is also a school run by Neumann’s wife (WeGrow), a fitness center (WeRise) and a retail concept in which non-members can reserve space by the minute (Made by We).