New York-based coworking company WeWork has taken one step closer to going public as it filed its registration statement. The company warned investors that an “economic downturn or subsequent declines in market rents” could cause WeWork members to cancel subscriptions and subsequently hurt its operations.
“While we believe that we have a durable business model in all economic cycles, there can be no assurance that this will be the case,” WeWork said in its filing. “A significant portion of our member base consists of small- and mid-sized businesses and freelancers who may be disproportionately affected by adverse economic conditions.”
Founded by Adam Neumann and Miguel McKelvey in 2010, WeWork has expanded to 425 office locations in 36 countries from its first office in fashionable SoHo in New York City. Backed by marquee investors such as SoftBank, the company was last valued at $47 Bn.
The company confidentially filed for an IPO in April-end. 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 his son Karan Virwani.
The member base at WeWork India has grown to over 25K members in 21 open locations across Bengaluru, Delhi and Mumbai within 18 months of its launch. The India unit is projected to grow to 90K seats by March next year. The company has also lined up expansion plans across Chennai, Hyderabad and Pune in the second half of 2019. Also, reports had speculated that the company is in talks to buy around 70% of WeWork India at a valuation of about $2.75 Bn.
Recently reports surfaced that WeWork is setting up $6 Bn in financing as it plans to increase and deepen its global footprint. Ahead of its IPO, WeWork is seeking to borrow in two ways: a $2 Bn letter-of-credit facility and a $4 Bn delayed-draw term loan.
The company filings showed that WeWork reported a net loss attributable to the company of $689.7 Mn in the six months ended June 30, compared with a loss of $628.1 Mn a year earlier. In the same period, revenue more than doubled to $1.54 Bn.
The company also did not give a time frame for becoming profitable as it continues to invest in expanding its operations. “Average revenue per WeWork membership has declined, and we expect it to continue to decline, as we expand internationally into lower-priced markets,” the company said.
WeWork, whose current investors include Japan’s SoftBank Corp, did not disclose how much it is looking to raise in the IPO and what valuation it will aim for.
According to a study by real estate consultancy Jones Lang LaSalle (JLL) and WeWork, the coworking industry in India was likely to attract more than $400 Mn in investments by 2018. The competition for WeWork India is hot with heavily-funded startups such as OYO, 91springboard, Sequoia-backed Awfis among others.