After Uber and Lyft, WeWork is one of the companies of the United States whose decision and announcement to become publicly listed as a tech company this year is being closely watched by investor with enthusiasm and expectations.
However the company is planning to significantly reduce the targeted IPO valuation, claimed various reports quoting sources with information about the company.
According to a report published in the Wall Street Journal, a valuation in the $20 billion range for its planned IPO is being sought by the parent company of WeWork. Earlier, the company had announced a target valuation of as much as $47 billion on the private market, according to the claims of CB Insights, a research company that tracks venture capital.
When WeWork submitted its IPO paperwork last month, there were a number of contentious issues that were highlighted by experts and analysts. For example, Kathleen Smith, principal at Renaissance Capital, a provider of institutional research and IPO ETFs pointed out that “the valuation has to be very reasonable for the public market at this point in time.”
“Public investors have seen the results of some other money-losing companies such as Uber and Lyft and how they’re trading so poorly,” Smith added.
A staggering loss of $1.9 billion was incurred last year by the We Company which is an almost unheard of amount for the company that had intentions to become a publicly listed company. It has also been reported that considerable control over WeWork, is set to be wielded by Adam Neumann, the company’s CEO and cofounder, because of the company is planning to create different stock classes which would give Neumann greater voting rights. And according to the IPO prospectus, millions of dollars have been made by Neumann by leasing properties back to the company which has raised questions about conflicts of interest.
In response to such criticism, The We Company has said in a filing this week that $5.9 million in stock has been repaid by Neumann through his holding company, WE Holdings LLC, whicjh had received the money against the selling of its trademark of the word “We” to The We Company. In January, WeWork rebranded itself as The We Company to serve as an umbrella company to its various businesses.
The We Company also announced the addition of Harvard Business professor Frances Frei to its board after it goes public in addition to the pricing change with the aim of appeasing he critics. Currently, the entire board of the company is comprised of men which means that there is no representation of a major segment of its community. This has put the company in an awkward position because its primary selling point is community.
“They’ve been responding to feedback — that’s encouraging,” Smith said.
Concurrent with the close of its public offering, it expects to raise up to $6 billion in debt, The We Company disclosed in its prospectus. The funds would be used by the company to continue to aggressively expand all across the world even in the face of mounting losses.
(Adapted from CNN.com)