SUMMARY
WeWork CEO Adam Neumann met Masayoshi Son to discuss IPO plans
Waning investor interest in the company’s IPO has reportedly spooked SoftBank
WeWork’s plans to expand its India operations to smaller cities hinge on IPO success
Even as coworking company WeWork is looking to expand its India presence with new properties in Pune and other smaller cities, its high-profile IPO plans have come up against resistance, from none other than lead investor SoftBank.
Ever since the company filed for its initial public offering (IPO), it has faced flak for losses and its vague business structure and model. Many have raised questions what makes WeWork a tech company, which is what has driven up its valuation. And in the latest blow to WeWork’s IPO plans, its biggest investor SoftBank has reportedly suggested that the company put the brakes on going public.
A Financial Times report quoted people briefed on the discussions to say that SoftBank’s enthusiasm for a listing has waned as bankers have slashed the valuation they believe WeWork can attain when it lists. We Co and WeWork CEO Adam Neumann reportedly flew to Tokyo to meet Softbank CEO Masayoshi Son to discuss these options. The suggestion of shelving IPO plans seems to be part of the same discussion.
WeWork Faces Stiffer India Competition
In India, the company is dealing with increasing competition from established rivals 91springboard, Awfis and OYO’s Workspaces and Innov8 coworking properties. Reports last month suggested WeWork is expanding with a 1.22 lakh sq ft office space in Pune, which would be its 24th property in the country.
WeWork India was launched in September 2017 as a brand franchisee controlled by Buildcon LLP, which is owned by real estate billionaire Jitu Virwani and son Karan Virwani. Other reports recently speculated that WeWork is in talks to buy around 70% of WeWork India at a valuation of about $2.75 Bn.
The pressure from SoftBank to drop the IPO comes days after reports surfaced that WeWork may seek a valuation of $20 Bn-$30 Bn, nearly half of its $47 Bn valuation in the last round. However, the valuation could be subjected to change since the company is still discussing the share sale terms.
The company, which was aiming to go public in September, was speculated to be delaying its IPO to 2020. It was expected that SoftBank could infuse more capital into the startup that would allow it to delay its IPO until 2020.
WeWork’s IPO plans brought huge wave of criticism for the way it obscured key details about the economics of the business. In particular, Neumann owns several commercial properties that he leased to WeWork, and he has sold significant amounts of his equity ahead of the public stock offering.
