WeWork records €810m loss as it prepares for IPO

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Flexible office giant WeWork has unveiled losses of $900 mln (€810 mln) for the first six months of the year, in documents filed with regulators ahead of its hotly anticipated stock market listing.

 

Reflecting last year's results, the office space firm also doubled its revenues over the period, reaching a figure of $1.54 bn.

Set to launch on Wall Street next month, ahead of a previously announced December listing, the firm has recently released the prospectus for its initial public offering (IPO), leaving some analysts unconvinced.

The We Company, valued at $47 bn, is now active in 528 locations in 111 cities worldwide, but critics have suggested that its business model of taking out long-term leases but operating as a landlord with short-term contracts would leave it exposed in a downturn. The firm's leases are 'non'cancellable', meaning it can't renegotiate in a recession.

'Large money-losing IPOs with high valuations tend to be challenging,' commented Kathleen Smith, of Renaissance Capital. 'IPO investors have already been burnt by Lyft and Uber. They are going to be cautious about WeWork.'

The WeWork hype has largely focused to date on its reputation as a tech-forward innovator. Indeed, its prospectus uses the word tech 123 times, notes BBC business correspondent Michelle Fleury.

WeWork is tasked with convincing investors it remains a dynamic, Silicon Valley style start-up with proptech in its DNA. However, its real estate lease obligations counteract its flexible credentials.

Earlier this year, WeWork launched its €2.6 bn Ark investment venture to move towards property ownership and away from its original 'asset light' model. WeWork founder Adam Neumann told Bloomberg the firm was betting on the idea that properties become 'more valuble' when occupied by WeWork.

However, it still has huge lease commitments. Data from the We Company suggests that these will total $39 bn by 2024. This year's leasing bill was $4 bn, and it is forecast to be double that for the next five years.

Other analysts have pointed out the worrying role of Neumann in the firm, who has been in the spotlight for his unusual accounting methods, potential conflicts of interest, and family involvement in the firm.

'WeWork will be the most ridiculous IPO of 2019,' said analyst Sam McBride of New Constructs Investment Analyst. 'It's difficult to imagine WeWork achieving profitability.'

Meanwhile, office space provider IWG, a rival to WeWork, is said to be considering spinning off its US business into a seperate listed company, according to media reports. An IPO is likely to come shortly after WeWork's listing, with iWG also targeting a valuation of around $50 bn.