WeWork shelved its plans for an initial public offering Monday, days after its chief executive resigned under pressure.
It was the latest sign of trouble at the fast-growing company, which rents out shared office space, and was until recently considered one of the world's most valuable startups. But investors balked at buying shares in the company, which has run up billions of dollars in losses and does not appear to be close to turning a profit.
"We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong," Artie Minson and Sebastian Gunningham, co-chief executives of the We Co., WeWork's parent, said in a statement. "This puts an official pause on our process of becoming a public company. Rest assured, WeWork will become a public company, but we can only IPO once and we want to do it right."
The withdrawal ends a turbulent process that turned one of the most hotly anticipated IPOs into a cautionary tale of the public market's reticence to pay up for an unproven business model. Co-founder Adam Neumann stepped down as chief executive officer last week after concerns about corporate governance and the money-losing startup's aggressive growth.
New York-based WeWork, which leases and owns spaces in office buildings and then typically rents desks to customers ranging from startups to corporations, has raised more than $12 billion since its founding nine years ago and has never turned a profit. The company had been targeting a share sale of about $3.5 billion in September, people familiar with the matter have said.
But the IPO plans filed in August were met with a blistering reception from some. Triton Research Inc. Chief Executive Officer Rett Wallace called the company's prospectus a "masterpiece of obfuscation," saying it obscured key details needed to understand the economics of its business.
WeWork co-founder Miguel McKelvey was in Bentonville on April 1 to announce company plans to open a 200,000-square-foot building downtown. The project is designed to house retail, community space and work space for more than 3,200 WeWork members across several floors, according to a company news release.
Gov. Asa Hutchinson and Bentonville Mayor Stephanie Orman attended the announcement at the Record event center in downtown Bentonville.
A WeWork spokesman said Monday that the "Bentonville project is signed, still a go and remains unchanged at this time."
The cost of the project or other details such as the opening date were not disclosed in April. Hutchinson said WeWork did not seek any special tax incentives or other help from the state to start up in Bentonville.
The company has more than 400 sites in 27 countries.
The path toward a public listing took a left turn two weeks ago when the company said it would delay its IPO but committed to completing the offering this year. For the next week, Neumann faced mounting pressure from board members and investors. On Sept. 24, he and the board agreed he would step down. During a conference call, he cast his vote against himself, knowing the outcome was already determined.
"While this may feel disappointing, the leadership team and our board have decided to take a step back to assess where we are as a company," the co-CEOs said in the internal note Monday. "These past few months have not been easy, but our team has been incredibly resilient. We are now focused on improving our core business -- balancing expansion with a focus on profitability."
WeWork will likely postpone the offering until next year, Bloomberg reported last week. The delay sidelines what was expected to have been the second-biggest IPO in the U.S. this year after Uber Technologies Inc. and also threatens a $6 billion credit financing that was contingent on a successful offering. The credit facility will be unwound if the IPO doesn't happen this year, a person with knowledge of the matter has said.
After having lost $900 million in the first half of this year, WeWork is planning on selling three businesses it acquired in recent years, according to people familiar with the matter, as well as a $60 million Gulfstream jet bought for Neumann to use on company business. The company is also exploring job cuts that would number in the thousands out of a staff of more than 12,000.
WeWork is in talks with investment banks about a new $3 billion loan, which would also be contingent on raising a substantial amount of new equity, people familiar with the matter told Bloomberg last week. A likely source of that equity infusion is SoftBank.
Information for this article was contributed by Peter Eavis of The New York Times; by Gillian Tan and Ellen Huet of Bloomberg News; and by Nathan Owens of the Arkansas Democrat-Gazette.
Business on 10/01/2019