90% of Workers Want Office Return, According to WeWork
A lot has changed since WeWork Inc. first tried to go public: a new leader, fewer employees, a global pandemic. One thing that remains the same: It still loses money.
In fact, at US$2.98 billion, the loss in the first half of this year is three times wider than in the same period in 2019. Still, investors were more welcoming this time around. The stock was up 13 per cent at the close of trading Thursday.
This week’s deal is the culmination of a two-year saga to take WeWork public. When it last tried in 2019, WeWork was a giant in real estate and technology. The company, which rents office space, was one of the world’s most richly valued startups and the largest office tenant in its hometown of New York City, with locations around the globe.
Adam Neumann, the towering co-founder, had carefully polished the company’s image over nearly a decade, but the prospectus for WeWork’s initial public offering peeled the veneer right off. The filing for the company laid out a series of personal and professional conflicts for Neumann -- apparent cases of nepotism, questionable loans and other controversial transactions -- and mounting losses.
The company’s loss of US$905 million in the first half of 2019 would have been even worse if not for a one-time accounting gain from a modified loan at the time. Yet, it was enough to contribute to WeWork’s near-collapse. Within months, Neumann was out of a job, WeWork almost ran out of cash, and a major shareholder, SoftBank Group Corp., agreed to bail the company out.
The current chief executive officer is Sandeep Mathrani, a longtime real estate professional who runs WeWork with Marcelo Claure, the company’s executive chairman and the chief operating officer at SoftBank. Neumann, whose name was referenced 169 times in the 2019 IPO prospectus, still looms large. His name comes up 197 times in a registration statement for the merger with a Nasdaq-listed special purpose acquisition company, BowX Acquisition Corp.
Although Neumann forfeited his management role, he retains a stake in the business of 9 per cent and a net worth of about US$2.3 billion. Neumann, 42, was also granted the right to return to WeWork board meetings in about four months as an observer.
Neumann and his co-founder, Miguel McKelvey, hosted a party Thursday for early employees in New York to celebrate the first day of trading. “Miguel and I couldn’t be happier to celebrate this with our original team,” said Neumann, wearing a T-shirt emblazoned with the slogan “Student for Life” and standing with his arm around McKelvey. “We congratulate Marcelo and Sandeep for executing on this team’s vision.”
After the last IPO disaster, WeWork’s business was further battered by the coronavirus pandemic. Many customers canceled leases and stopped paying rent when the economy turned and workers stayed at home. WeWork’s loss ballooned to more than US$2 billion in the first quarter of this year.
Things have rebounded in recent months, WeWork executives have said. Revenue in the first half of the year was US$1.19 billion.
WeWork now trades on the New York Stock Exchange under the ticker symbol WE. Although the stock climbed Thursday, the deal value of about US$9 billion is a sharp drop from the US$47 billion valuation SoftBank gave the business in 2019.
SoftBank and WeWork see a bright future, though. The post-virus office environment is poised to benefit flexible offices, the companies have said. Larger businesses are signing up, WeWork said, as workers increasingly detach from regular offices.
Mathrani had said in January that WeWork would be profitable by year-end. WeWork has since revised that forecast. The company said it’ll generate positive free cash flow next year.