WeWork Works Wonders?
Is profit overrated? WeWork might have you think so. Itâs set to be the latest of this yearâs new batch of stocks that may hit the market through an IPO, and though itâs hugely contentious, it deserves a fair shake.Â
WeWork is a real estate business that buys buildings and then converts them into office space. Itâs a âdown with the cool kidsâ type of company, now branching out into residential living spaces, gyms, and even private kindergartens! Thereâs only one problem: WeWork loses $219,000 every hour of everyday. Gulp!
As the IPO got closer, and the company better scrutinised by potential investors, the value of the company was cut from $47bn to as low as $15bn. Even its major investor, the Japanese, Saudi-backed SoftBank, has reportedly argued against pressing ahead with the sale, a delay that threatens a $6bn loan needed to fund an aggressive global expansion of the brand. So now the market doesnât know whether to laugh or cry. One thingâs for sure, most investors plan to emphatically short WeWork stock should it ever see the light of day with a Nasdaq debut. Bearish investors are running the show, hoping to profit by betting against the company, which brings us to the juicy partâŚ
The founder, Adam Neumann, siphons money off his company by leasing it his own properties. Heâs also personally registered the rights to âWeâ and licensed it back to WeWork for $5.9 million! Granted, heâs now paid that money back in an effort to resuscitate the IPO dream, but some still maintain that none of this would have ever happened if debt wasnât so cheap, and venture capitalists didnât throw darts with their eyes closed.
Putting the self-dealings to one side, WeWork has hope. Put yourself in a start-upâs shoes. Investing in an office is risky, so being able to pay for just a desk or two and optionally scale up with WeWork makes a lot of sense. If Adam Neumann (Gwyneth Paltrowâs cousin by the way) can not only win back investorsâ trust, but also a competitive advantage for his firm that stops other landlords from rolling in and copycatting, then he could go from zero to hero. Now, wouldnât that be a story?