WeWork, the office-coworking company valued at $47 billion, made public on Wednesday its paperwork for an initial public offering, starting the countdown to one of the most highly anticipated — and potentially scrutinized — market debuts of the year.
In its filing with the Securities and Exchange Commission, WeWork’s parent company, The We Company, gave the world the first official look at its business results, revealing billions in losses, a sprawling collection of leases, and plans to continue spending aggresively to go after a market opportunity it pegged at a staggering $1.6 trillion.
WeWork hasn’t said how much it plans to raise through its IPO, though media reports suggest the figure will be at least $3 billion. The firm will trade under the ticker WE, but it hasn’t said where it plans to list.
“The more locations we strategically cluster in a given city, the larger and more dynamic our community becomes,” the company wrote in its S-1 filing, a prospectus for potential investors in the IPO that underscored the company’s heady business ambitions and the fervid corporate culture that some have described as “cult-like.”
“We dedicate this to the power of We — greater than any one of us, but inside each of us,” read one of the filing’s opening lines.
At the center of the business vision and the grandiosity is CEO and cofounder Adam Neumann, a 40-year-old Israeli businessman who will control a majority stake of WeWork’s voting power as a public company. Neumann founded WeWork in a New York’s Little Italy neighbhorhood in 2010, after a couple of earlier business ventures, including a baby cloting company and a failed venture involving a collapsible heeled shoe.
Debt, losses and soaring ambitions
The filing reveals that WeWork has signed a commitment letter with more than 10 banks to raise $6 billion in debt. The company has already raised almost $8.4 billion to date.
The firm’s income statement shows spiraling losses over the past three years:
- In 2016, WeWork lost $429 million on $436 million in revenue.
- The following year, that loss increased to $890 million on $886 million in revenue.
- And for 2018, WeWork lost $1.6 billion on $1.8 billion in revenue.
- For the first six months of 2019, the firm posted a loss of $690 million on $1.5 billion in revenue.
The company revealed that it has minimum future lease obligations of $47 billion over the next 15 years.
WeWork’s main investor, SoftBank, features heavily in the filing.
The document doesn’t specify what percentage of the company SoftBank holds, but the firm has investments and commitments in WeWork of $10.65 billion. The Japanese firm holds 114 million shares, compared with Benchmark’s 32.6 million shares and Neumann’s 2.4 million shares.
We Co. is expected to be the highest-valued startup to go public since Uber in May. But that might give investors pause. Uber, Lyft, and Slack — the other giant startups that debuted this year — have fared poorly since going public, trading below their offering prices.
Neumann could also face particular scrutiny from investors. He has invested in buildings that were later leased to WeWork, a potential conflict of interest, though he later said he would transfer his interest in those buildings to an investment fund partially controlled by We Co.
The filing confirms that Neumann will transfer his interest in these buildings, but it also says WeWork has minimum lease obligations of $236.6 million for the four buildings.
He also has sold off or taken out personal loans backed by his We Co. shares to the tune of $700 million, far outside the norm for startup founders. More recently, he reconfigured We Co.’s corporate structure so that insiders like him would pay fewer taxes on the company’s future profits than outsider investors would.
According to the filing, Neumann will continue to control the bulk of the voting rights through his tranche of class B and C shares. His wife, Rebekah Neumann, is listed as a cofounder and WeWork’s chief brand officer — and, unusually, would help pick Adam Neumann’s successor if he dies or becomes “permanently disabled.”
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