Tue, Sep 10, 2019 - Page 10 News List

WeWork to cut valuation to less than US$20 billion


Fast-growing office-sharing start-up WeWork plans to again cut its valuation, this time to below US$20 billion, and is under pressure from some investors to postpone its stock market debut, sources said on Sunday.

It is the second time in three days that the company has cut its valuation target, after sources said on Thursday last week that its parent, The We Co, was revising it down from US$47 billion to US$20 billion over doubts about its prospects from potential investors.

Some investors are also worried about skepticism surrounding the company’s business model and want its planned initial public offering (IPO) to be pushed to next year, sources said on condition of anonymity.

JPMorgan Chase & Co and Goldman Sachs Group Inc, the two main underwriters for the IPO, are to hold meetings with each other and investors to try to ease their fears.

A roadshow to market the shares to new investors that was supposed to begin today was in doubt, and there were chances that it would not happen this week, sources said.

WeWork declined to comment.

Investors doubt WeWork’s ability to make money fast enough and also wonder if the company is solid enough to withstand a slowdown in the global economy, sources said.

The company aims to raise just over US$3 billion from its IPO, considered one of the most important of the year, and to obtain a line of credit of US$6 billion from major banks, sources said.

The New York-based start-up, which launched in 2010, touts itself as revolutionizing commercial real estate by offering shared, flexible workspace arrangements. It has operations in 111 cities in 29 countries.

The company lost US$1.9 billion last year with revenue of US$1.8 billion.

WeWork has ventured into new areas like residential apartments and education, and tells investors that they should see its quarterly losses as investments.

However, moves by cofounder Adam Neumann, such as personally investing in real estate before renting it back to WeWork, have also caused consternation.

The reduction in WeWork’s valuation is the latest disappointing news from the multibillion-dollar tech “unicorns” seeking to tap into Wall Street for fresh financing.

Lyft Inc and Uber Technologies Inc have seen their shares slump after IPOs for the ride-hailing services this year, and office collaboration software group Slack Technologies Inc has also seen losses after its direct market listing.

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