Co-working space provider WeWork decided this week to postpone its much anticipated initial public offering (IPO) after facing questions about its business model and corporate governance, according to The New York Times and other news outlets. The company might try to go public in a few months, but the IPO could be canceled entirely, according to someone involved with the offering.
Some of the world’s biggest investors, like SoftBank, put their support—and dollars—behind WeWork, but Wall Street did not share the same enthusiasm. WeWork’s parent company, We Company, planned to market the IPO to prospective investors this week, but the road show was scrapped after the organization couldn’t find a lot of demand from potential investors.
“The We Company is looking forward to our upcoming IPO, which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment,” the company said in a statement.
The question now is if WeWork could not generate investor enthusiasm now, what would get investors interested after a weeks or months long delay. The co-working office provider was privately valued at $47 billion earlier this year after SoftBank’s large investment. However, more attention has been paid to the fact that WeWork has been unprofitable and will probably continue to be rather than the valuation. WeWork recorded an operating loss of $1.37 billion and spent $1.5 billion cash during the first half of 2019, according to The New York Times.
WeWork has made efforts to save the IPO. Last week, the company stated it would scale back it co-founder and CEO Adam Neumann’s power. Despite these changes, WeWork joined the likes of Uber and Lyft as businesses that were valued at $1 billion or more to suddenly falter. Both ridesharing companies saw their shares decrease after their IPOs this year.
Investors and analysts have also said WeWork hasn’t been transparent when it comes to company profits and occupancy that would have provided better insight into how the properties were performing, according to The New York Times.
Meanwhile, an IPO delay will force WeWork to find other ways to generate cash. We Company might have to slow down its expansion plans now that it won’t have a new infusion of money. The company’s current expansion is costing hundreds of millions of dollars in cash, according to The New York Times. WeWork also expected to collect $6 billion from bank financing that was tied to the stock sale—but only if the company raised at least $3 billion from the IPO. The financing hasn’t been renegotiated yet, according to someone familiar with the matter. However, WeWork could come to a new agreement with the banks.