IPO Valuation Cut: Why WeWork is Being Slammed by Critics

If the WeWork IPO even makes it to market, it may not even be worth owning.

The company, which rents out spaces to businesses was founded back in 2010 by CEO Adam Neuman – whose site says he’s “committed to elevating the collective consciousness of the world by expanding happiness and unleashing every human’s superpowers,” says CNBC.

Unfortunately, the market doesn’t seem to share in expanding any of that “happiness.”

Instead, it’s looking more like an unfriendly flop before its even hit the market. 

Not only has the company been slammed by critics, like billionaire Sam Zell, its valuation has been drastically cut, and it’s not likely to go public next week, if at all. In fact, its parent company, We Co. is now considering a price tag that would give it a valuation of maybe $20 billion, which is less than half of the $47 billion valuation in the private market.  

Worse, no one really seems enthralled with the company, especially Sam Zell.

The billionaire recently slammed the company for offering little more than what already exists, as also highlighted by CNBC.  “I had the privilege of investing in this kind of company once before. As a matter of fact, this kind of company began in 1956,” when office subletting emerged, Zell said. “Every single company in this space has gone broke.”

Other critics have long questioned the company’s multi-billion-dollar losses, and after an S-1 filing revealed a complicated corporate structure, massive liabilities, and no real path to profitability at all. No wonder investors are raising flags here.

Granted, the company does have 527,000 members in 111 cities around the world, which nearly doubles the 268,000 members it had year over year.  But losses can’t be ignored here. In fact, it lost $1.61 billion in 2018, up from $884 million in 2017, according to USA Today

It had a net loss of $689.7 million on revenue of $1.54 billion for the first six months of 2019, as compared to a loss of $628.1 million on revenue of $763.8 million in the prior-year period.

On top of that, total expenses grew to $2.9 billion in the first six months, as compared to a loss of $1.44 billion in the first six months of 2018. Then, according to USA Today, the company said that because it spends so heavily to grow, it may not be able to achieve profitability.  

No thank you, WeWork.