Seems a lot of negative news is provoking a response
Softbank- after investing US$10.5Bn at a US$47Bn valuation in WeWork – now doesn’t want a WeWork IPO … one way not to recognise a potentially heavy investment loss is to close your eyes, ignore the evidence and pretend nothing has happened, reports the FT . A listing would expose the horrible truth about the allegedly hip workspace landlord isn’t worth its US$47Bn value. Try $15bn-$20bn, suggests Wall Street. That was Wednesday 11 September— by Friday 13 September the IPO valuation had fallen to “as low as” $10 billion, according to leaks dutifully reported by CNBC, Reuters, and elsewhere. From $47 billion to $10 billion would be a collapse in value of 79%.
Even worse… WeWork has an even more successful, older, listed competitor which creates an unflattering financial comparison. London-listed property-leading group IWG, which has been in the same marketplace for years and makes real profits is worth a more sensible £3.6bn.
There’s an obvious risk in taking on long leases on big buildings and offering tenants short, flexible rents. In a recession, tenants may decide to trade down.Even though the use of Special purposes vehicles to avoid any paying any debts may be a great way to avoid liquidation it’s not a solid foundation to rebound after the recession.Then there’s the fact that CEO Neumann cashed out more than $700 million from the company in a mix of stock sales and debt — the S-1 says his last stock sale was in “late 2017” — not a great look for a founder trying to demonstrate to others why they should buy the stock. On top of that, critics point to WeWork’s investments in seeming distractions — like its WeGrow elementary school and a wave pool company — as more examples of a tech company with overreaching ambitions. Furthermore, its recent rebrand to The We Company sets the stage for expansion into more sectors including banking, housing, and even sailing.
What’s worse there will be a clash between WeWork & investor Softbank. WeWork needs to raise $3bn-plus to keep expanding and unlock further investment. SoftBank, on the other hand, won’t want a formal loss on its WeWork investment while it’s looking to raise $100bn for its next Vision fund. It will still be in money on the early portions of its investment but any valuation for WeWork below $25bn looks likely to imply an overall loss.