The highly anticipated IPO of WeWork has landed in the doldrums. Despite its challenges, WeWork is marching towards a public listing.
A NASDAQ listing for WeWork
The We Company, WeWork’s parent will list on NASDAQ, the home of American tech-oriented companies. It is expected to market the listing next week to create some buzz for its share before the official trading begins. A preliminary price range for its stock will also be available next week.
However, the challenges for WeWork are far from over. The company has been criticized for its business model that has long term liabilities and short-term revenue sources. There are severe corporate structure issues, and some people have also pointed to an unusually close relationship between the company and its founder Adam Neumann. He will be holding a majority of The We Company’s voting rights through special shares that grant him 20 votes per share.
Initial hiccups have led the company to slash its valuation to less than $20 billion. Interestingly, during its latest funding round in January this year, it was valued at a whopping $47 billion. Cutting the value by over 50% within a year has also made some investors and experts suspicious of the company. They are now questioning if the company has the potential to break-even and become profitable.
What works against WeWork?
It is not just the internal issues that are making investors weak in their knees. This year, Uber, the most hyped IPO of recent times, also opened to disappointing results. The company had to cut valuation right before its listing but couldn’t manage to continue being a market favorite. Its smaller rival Lyft also listed with much fanfare only to meet the same fate.
What makes WeWork similar to these two companies is its hype, cult status and the fact that it hasn’t turned profitable yet. However, it is working on some internal issues to appeal to the investors. It is planning to make sweeping changes to its corporate structure which would help it follow industry best practices.
To bring more confidence to the market, the company has also diluted Nuemann’s special share voting power to half. It also confirmed on Friday that his family members will not take any seats on the company board. The workspace provider company is now looking forward to more positive investor sentiment that could help them stray from the path Uber’s shares took earlier this year.