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Source: Thailand Startup News  Sep 04, 2019

WeWork Goes For IPO, But Admits Losses US$1.6 Billion

WeWork Goes For IPO, But Admits Losses US$1.6 Billion
Source: Thailand Startup News  Sep 04, 2019
The office coworking company, WeWork valued at US$47 billion, announced its plans for IPO and already made necessary fillings to the US SEC, starting the countdown to one of the most highly anticipated and potentially scrutinized market debuts of 2019.Many investment experts are however not sure that the results of the IPO would go as planned.

WeWork's parent company The We Company, in its fillings with the SEC, gave the media the first official look at its business results, revealing billions in losses, a sprawling collection of leases, and growing revenue.All not very positive indicators to would be investors.

WeWork has not announced how much it plans to raise during the IPO, although industry reports suggest the figure will be at least US$5 billion. The firm will trade under the ticker "WE", but has not revealed  where it plans to list. The filing reveals that WeWork has signed a commitment letter with more than 11 banks to raise US$6 billion in debt. The company has already raised almost US$8.4 billion to date.

The firm's balance sheet shows increasing losses over the last few years: during the year December 31, 2016, WeWork lost US$429 million on US$436 million in revenue.In 2017 losses increased to US$890 million on US$886 million in revenue.For 2018, WeWork lost US$1.6 billion on US$1.8 billion in revenue and in the first six months of 2019, the firm posted a loss of US$690 million on US$1.5 billion in revenue.

The company revealed it has minimum future lease obligations of US$47 billion over the next 15 years. WeWork's main investor, SoftBank, features heavily in the filing. The fillings does not specify what percentage of the company SoftBank holds, but the firm has investments and commitments in WeWork of US$10.65 billion. The Japanese firm holds 115 million shares, compared to 32.7 million shares for investor Benchmark and Neumann's own portion of 2.5 million shares.

We Co. will be the most highly valued startup to go public since Uber in May 2019. But that may give investors pause. Uber as well as Lyft and Slack, the other giant startups that debuted in 2019, have fared badly since going public, trading below their offering prices.

Founder and CEO Adam Neumann also faces close  scrutiny from investors. He  personally invested in buildings that were rented out  to WeWork, an  action that is a potential conflict of interest, although he later claimed that 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 also states WeWork has minimum lease obligations of US$236.6 million for the four buildings.

He also has sold off or taken out personal loans backed by his We shares to the tune of US$685million,  which is far outside the norm for startup founders. More recently, he reconfigured We’s corporate structure so that insiders like him would pay fewer taxes on the company's future profits than would outsider investors.

Many in the investments and financial industry are however skeptical and do not anticipate the  IPO would be a success considering the startups history, losses and the ongoing global economic situation.