Shared-office company WeWork has been a poster child for greed and ignorance with the collpase of their previous IPO, the billion dollar losses to SoftBank and the wipe out of paper wealth for co-founder Adam Neumann. Now we get a second try through BowX Acquisition, week one $WE Shares closed 13% higher
Shared-office company WeWork has been a poster child for greed and ignorance with the collpase of their previous IPO, the billion dollar losses to SoftBank and the wipe out of paper wealth for co-founder Adam Neumann. Now we get a second try through BowX Acquisition, week one Shares closed 13% higher
WeWork debuted on the NYSE ubder the symbol WE following a merger with the special purpose acquisition company (SPAC) BowX Acquisition Corporation (NASDAQ: BOWX). The combination provided WeWork with cash proceeds of around $1.3 billion, and a valuation of around $9 billion. A long way down from the valuation of $47 billion WeWork commanded in 2019, following an investment from SoftBank Group in the private markets.
Many thought it was over after the calamity that ensued and the pandemic. Two events that caused great and sudden damage and distress; nothing short of a disaster.
The big question is will a second try at an IPO work for WeWork?
There are many doubters This week We Work made its debut on the New York Stock Exchange and shares closed 13% higher. WeWork’s public launch capped a journey to a listing has been one of urban legend. There was the implosion of its initial public offering in 2019 and the ouster of its co-founder and chief executive, Adam Neumann.
SoftBank founder and CEO Masayoshi Son said his investment in WeWork was “foolish.” The comment came as SoftBank gave WeWork a valuation of $2.9 billion as of March 31 based on a discounted cash flow method, down from $7.3 billion as of Dec. 31, 2020. WeWork’s private valuation was as high as $47 billion before its botched IPO imposion in 2019. SoftBank’s $2 billion funding round in January 2019 valued WeWork at $47 billion ahead of its bid to go public.
Prior to the IPO filing, the coworking-space company was expected to seek a valuation as high as $100 billion. That number slowly crept down as investors analysts looked into its financials. WeWork attempted a refresh under Sandeep Mathrani that involved closing locations, renegotiating leases and cutting thousands of jobs to reduce expenses during the pandemic. WeWork went public through a combination with BowX Acquisition Corp., a special-purpose acquisition company.
WeWork has never been profitable, but Mathrani has said the company is on track to get there by the end of this year. Earlier this month, We Work reported preliminary third-quarter revenue of $658 million, up from $593 million in the second quarter. Total occupancy across consolidated operations rose to 60% at the end of the third quarter. That was an increase from 52% at the end of the second quarter. The company has cut costs significantly since Neumann’s downfall but still took a major hit during the covid-19 pandemic as workers stopped going into the office.
WeWork’s losses quadrupled to $2.1bn in the first quarter of 2021 as the pandemic-driven move to flexible working drove a 30% plunge in customers at the troubled office-sharing company. WeWork’s quarterly revenues almost halved, from $1.1bn to $598m, as customer numbers plunged by almost 30% year-on-year from 693,000 last March to 490,000 a year later.
The company made a loss of $556m in the same quarter in 2020 and was also hit by an almost $500m non-cash charge relating to a settlement with ousted co-founder Adam Neumann. Neumann no longer holds a position at WeWork, although he maintains a roughly 11% stake in the company.
Investors now in October 2021 are hoping to see the green shoots of recovery as the easing of pandemic restrictions and gradual return of workers to office locations improved its prospects. But the company could benefit from a rebound in demand for co-working spaces as companies seek more flexible options for their employees.
From The TradersCommunity Research Desk