WeWork Works Wonders?
Is profit overrated? WeWork might have you think so. It’s set to be the latest of this year’s new batch of stocks that may hit the market through an IPO, and though it’s hugely contentious, it deserves a fair shake.
WeWork is a real estate business that buys buildings and then converts them into office space. It’s a “down with the cool kids” type of company, now branching out into residential living spaces, gyms, and even private kindergartens! There’s 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 doesn’t know whether to laugh or cry. One thing’s 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 part…
The founder, Adam Neumann, siphons money off his company by leasing it his own properties. He’s also personally registered the rights to ‘We’ and licensed it back to WeWork for $5.9 million! Granted, he’s 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 wasn’t so cheap, and venture capitalists didn’t throw darts with their eyes closed.
Putting the self-dealings to one side, WeWork has hope. Put yourself in a start-up’s 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 Paltrow’s cousin by the way) can not only win back investors’ 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, wouldn’t that be a story?
