The We Company, the parent of WeWork has decided that it will not move ahead with its IPO plans. Uninterested investors led to the sad fate of their public listing.
What went wrong?
WeWork was working on one of the most highly anticipated IPOs of the year, but the consequences of previous listings like Uber and Lyft have made the investors conscious. The negative sentiment towards a new multi-billion-dollar IPO was clearly going against WeWork, which had already slashed its valuation in half to appeal to investors. Unfortunately, they didn’t want another startup unicorn on the market anytime soon.
The New York based company planned to launch a roadshow this Monday and announce its shares and share price next week. It now wants to postpone the filing towards the end of the year. The company failed to warm up to institutional investors, who have numerous concerns about the company’s corporate structure and the influence of its co-founder Adam Neumann. This, coupled with the mounting operating losses of the company, is keeping institutional investors out of the fold.
The company’s listing was being led by Goldman Sachs and JP Morgan Chase which was expected to raise about $3 to $4 billion. A source with knowledge of the matter commented that the IPO could now be pushed to the end of the year or even early 2020.
Is WeWork under pressure to go public?
The anticipation around WeWork’s IPO is quickly turning into an embarrassment for the company. It has been adopting a now-off-now-on approach towards the IPO. Recently, the company also held some talks with SoftBank, its biggest backer about a cornerstone investment in the public listing. However, it wasn’t made clear with the Japanese company was willing to infuse fresh funds into the company. Note that the investor’s executives have previously pressurized Neumann to delay the IPO listing. However, Neumann decided to push the IPO despite repeated warnings from SoftBank.
Now that the IPO has been delayed, The We Company will also be unable to access a $6 billion loan. The debt was to be provided by a consortium of banks if the listing sailed smoothly. If the listing isn’t completed by the end of 2019, the company will have to create a financial plan from scratch to keep itself capitalized. They may face a cash crunch owing to a high rate of global expansion and a $1.5 billion investment promised by SoftBank in 2020 may not be enough to stop its capital leaks.