WeWork to test IPO investor appetite with widening losses

NEW YORK: WeWork owner The We Company published detailed financial statements for the first time, revealing breakneck revenue growth and soaring losses, as it prepares for an initial public offering as early as next month.
The IPO, which could raise several billion dollars, will be a key test of investor appetite for fast-growing, money-losing start-ups, at a time when global concerns about recession and the trade war between the United States and China are fuelling stock market volatility.
Other high-profile IPOs this year, such as those of ride-hailing start-ups Uber Technologies Inc and Lyft Inc, have fared poorly after their launch, amid investor scepticism over their lack of a concrete plan to profitability.
“Large money-losing IPOs with high valuations tend to be challenging in the IPO market,” said Kathleen Smith, founding principal at IPO research firm Renaissance Capital. “IPO investors have already been burnt by Lyft and Uber. They are going to be cautious about WeWork.”
One of the risks We Company investors have to grapple with is a mismatch between the company’s cash flow and liabilities. It rents out workspace to clients under short-term contracts, even though it pays rent for them itself under long-term leases.
“This is going to be an extremely volatile stock. Investors will debate whether this is a company that has a niche that’s going to be very profitable, or if this is an overvalued real-estate company fraught with risks,” said Jay Ritter, an IPO expert and professor at the University of Florida.
We Company, co-founded in 2010 by its chief executive, Adam Neumann, said in a filing with the US Securities and Exchange Commission that it lost more than $900 million in the first half of 2019, up 25 per cent from a year earlier, even as its revenue doubled to $1.54 billion. — Reuters