WeWork, the global real estate company that has dressed itself as a tech startup, might not be worth $47 billion after all. Actually, it might not even be worth half. The New York City-based firm’s upcoming IPO has been scrutinized like few others of late. That interest stepped up yesterday, when reports emerged WeWork is considering selling shares at a price that would value it around $20bn.
If it’s now $20bn, why not $10bn? Or five? NYU professor Scott Galloway put it another way, when he spoke with Bloomberg Technology: “This is me putting my Toyota Camry on the market for a million dollars, and then when I get market feedback that that’s not gonna fly, I try and (sic) price it at half a million…I don’t think it’s anywhere near $20bn.”
Real estate tycoon Sam Zell offered a simpler assessment on CNBC’s Squawk Box: “Every single company in this space has gone broke.”
WeWork resembles one of the giant, articulated vehicles that star in the History Channel’s Ice Road Truckers: there is tons of value, and plenty of moving parts—but it’s still rolling on ice. Financial reports released for the first time in August revealed little to vault the We Company, WeWork’s parent, above competition like Serendipity Labs or International Workplace. Last year it lost $1.61bn. Its 527,000 members represent a 90% increase on 2018. But its longterm lease obligations are almost $18bn, in a real estate market set for tough times. Far from commanding an entirely new industry, WeWork is chattel to one of the oldest in the world.
That hasn’t stopped Adam Neumann, the charismatic We Company CEO, from throwing up his own bat-sign. SoftBank, the Japanese mega-investor, has already sunk $10.5bn into WeWork. Neumann met with SoftBank executives in Tokyo last week to discuss the IPO. SoftBank has some of the deepest pockets on earth—its Vision Fund has $100bn to play with. Some suggest it could buy a large portion of any shares offered in a WeWork IPO, or simply plough more capital into its glitzy portfolio firm.
What happens in Japan might be considered a pulse-check on the current batch of American ultra-startups, such as Uber, which have flattened opposition and spread globally without making money. Neumann has moved to reduce his own outsized role, which spooked investors nervous of another Travis Kalanick: despotic, and prone to costly gaffes.
That will help his company—as will opening with lower share prices. But the point remains: WeWork is a gigantic investment risk, and few on Wall Street or beyond will be enthused by its past few months of business—Japanese sugardaddy or no.