WeWork tiptoes back to the water cooler

New York

WEWORK has changed in the two years since it tried and failed to go public - and so have the markets. That gives the office-sharing company a better shot at listing its shares, as long as this time it does so at a realistic price.

The company's attempt to bring in outside investors two years ago fizzled partly because of WeWork's inability to generate positive cash flows, and side-deals it had made with founder Adam Neumann. Its valuation based on fundraising rounds plummeted from US$47 billion to US$8 billion.

In the end, it was backer SoftBank that provided continued financial support.

That was October 2019. WeWork has since removed Mr Neumann, replacing him with Sandeep Mathrani. It sold an iconic New York City building to Amazon.com and scaled back its international footprint.

As of this year, the company is considering raising funds again, possibly through a special purpose acquisition company (SPAC), Reuters has reported.

Office rentals are struggling, but WeWork is holding its own, relatively. Global office leasing volumes in the third quarter of 2020 were down 46 per cent year-on-year, according to JLL.

While WeWork's revenue fell to US$811 million, it was just a 14 per cent drop compared to the same period in 2019. And it burned half as much cash as a year earlier.

In the meantime, hype has shifted from high-growth tech companies like WeWork to more speculative companies, some of which have little or no revenue.

WeWork, though not quite the phenomenon it was in 2019, looks strong when stacked up to other firms like helicopter company Blade and electric van company Arrival, which have less well-established business models.

WeWork has a shot at a listing with a reasonable valuation.

An enterprise value of US$13 billion, say, puts it at the same four times revenue multiple of IWG, parent company of competitor Regus, if its third-quarter revenue were annualised. It us hardly as exciting as Neumann-era WeWork. That, though, has its own appeal.

WeWork is in talks to go public via a SPAC, Reuters reported on Jan 28.

The company, run by Mr Mathrani, is weighing various options, including raising funds from private investors, the article said, citing a source familiar with the matter. REUTERS