WeWork’s valuation of about $42 billion makes it one of the world’s most valuable privately held companies. Begun as a co-working space in Manhattan eight years ago, it has also become one of the biggest corporate landlords in the world. It has continued to expand rapidly into new markets around the world.
But the costs of the company’s rapid growth stand out, even among the crowd of technology darlings that run huge losses to expand their empires.
For WeWork, one of the most important measures of its success is its breakneck growth — even if that means huge losses.The co-working company disclosed on Monday that its losses more than doubled last year to about $1.9 billion, even as its total revenue also doubled to about $1.8 billion. But instead of expressing concern about the mounting losses, executives argued that they were a sign of the company’s giant ambitions.
“We can very much, if we chose to, moderate our growth and become profitable,” Artie Minson, WeWork’s president, said in a telephone interview.
WeWork Cos. said Wednesday that sales growth accelerated and losses slightly narrowed in the first quarter. The New York company, one of the country’s most valuable startups, is preparing to test public investors’ appetite for another tech-infused, cash-burning business after the disappointing debut of Uber Technologies Inc.
However softbank could be the issue. The initial public offering of its parent company, We Co., is being delayed, and when it does occur, the stock market may value the company at as little as $15 billion, about one-third of the $47 billion valuation it had when Son last put money into the company. As the September quarter draws to a close, SoftBank will need to decide whether to write down the value of its 29% stake in WeWork.
The two sides have been in talks over an increase to the sum SoftBank would pump in of at least $1bn, with negotiations centred on the valuation cut WeWork would be dealt in the transaction. Fresh capital is critical for WeWork, which is also seeking to clinch a much-reduced $3bn to $4bn loan from a group of Wall Street banks. The lenders are refusing to bankroll a deal of that size unless WeWork first raises new equity, according to multiple sources.
The unravelling of the IPO has already shown up in the accounts of several of WeWork’s investors. The investment bank Jefferies late on Thursday took a $146m writedown on a stake it purchased in the co-working space provider in 2013. Jefferies said it had reduced its valuation based on an estimate it made on August 31, which included a “significant discount due to uncertainty regarding the timing and pricing of We’s IPO”, and that it could face further writedowns in the future.