WeWork’s parent The We Company said on Monday that it is filing to withdraw its initial public offering (IPO), a week after the SoftBank-backed office-sharing startup ousted founder Adam Neumann as its chief executive officer.
The withdrawal of its IPO prospectus formalises the end of the pursuit of a near-term listing for the company, which is based in New York City. It also allows Neumann’s successors to proceed with the company’s financial turnaround without disclosing as much information publicly.
The decision to abandon the IPO marks the conclusion of a tumultuous few weeks for the United States office-sharing firm, which failed to excite investors – who raised concerns about its burgeoning losses and a business model that involves taking long-term leases and customers renting out spaces for shorter periods.
Furthermore, experts pointed out that removing Neumann from the CEO role and addressing governance issues was not enough, and that such a business model was unlikely to thrive during an economic downturn.
According to the IPO prospectus it filed earlier in September, We Company had cash and cash equivalents of roughly $2.5bn as of June 30. However, while the company’s revenue doubled to nearly $1.8bn in 2018, its losses also more than doubled to $1.9bn.
The decision to scrap the public share sale will also put pressure on WeWork to secure alternative funding, given that a $6bn loan deal with banks – agreed last month – hinged on a successful share sale of at least $3bn.
Analysts have projected that WeWork will burn through several billion dollars over the next few years and thus needs to keep on raising fresh funds at favourable valuations.