WeWork Files for IPO, Revealing Spiraling Losses of $1.6 Billion
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WeWork, the office coworking company valued at $47 billion, made public on Wednesday its paperwork for an initial public offering, starting the countdown to one of the most highly anticipated -- and potentially scrutinized -- market debuts of the year.
In its filing with the Securities and Exchange Commission, WeWork's parent company The We Company, gave the world the first official look at its business results, revealing billions in losses, a sprawling collection of leases, and growing revenue.
WeWork hasn't stated how much it plans to raise during the IPO, although media reports suggest the figure will be at least $3 billion. The firm will trade under the ticker "WE", but hasn't said where it plans to list.
The filing reveals that WeWork has signed a commitment letter with more than 10 banks to raise $6 billion in debt. The company has already raised almost $8.4 billion to date.
The firm's balance sheet shows spiralling losses over the last three years:
- During the year December 31, 2016, WeWork lost $429 million on $436 million in revenue.
- The following year that loss increased to $890 million on $886 million in revenue.
- And for the full year 2018, WeWork lost $1.6 billion on $1.8 billion in revenue.
- For the first six months of 2019, the firm posted a loss of $690 million on $1.5 billion in revenue.
The company revealed it has minimum future lease obligations of $47 billion over the next 15 years.
WeWork's main investor, SoftBank, features heavily in the filing.
The document doesn't specify what percentage of the company SoftBank holds, but the firm has investments and commitments in WeWork of $10.65 billion. The Japenese firm holds 114 million shares, compared to 32.6 million shares for investor Benchmark and Neumann's own portion of 2.4 million shares.
We Co. will be the most highly valued startup to go public since Uber in May. But that may give investors pause. Uber -- as well as Lyft and Slack, the other giant startups that debuted this year -- have fared poorly since going public, trading below their offering prices.
CEO Adam Neumann could also face particular scrutiny from investors. He personally invested in buildings that were later leased to WeWork, a potential conflict of interest, although he later said he would transfer his interest in those buildings to an investment fund partially controlled by We Co.
The filing confirms that Neumann will transfer his interest in these buildings, but also states WeWork has minimum lease obligations of $236.6 million for the four buildings.
He also has sold off or taken out personal loans backed by his We shares to the tune of $700 million, which is far outside the norm for startup founders. More recently, he reconfigured We's corporate structure so that insiders like him would pay fewer taxes on the company's future profits than would outsider investors.
According to the filing, Neumann will continue to control the bulk of the voting rights through his tranche of class B and C shares. His wife Rebekah Neumann is listed as a cofounder and WeWork's chief brand officer and, unusually, would help pick Neumann's successor if he dies or becomes "permanently disabled."