WeWORK GETTING READY “..a commerce office leasing company and not truly a tech company ..” By Todd Horwitz, Bubba Trading.

 


WeWork IPO Brewing

WeWork’s parent company unveiled the papers for its initial public offering, depicting a business whose revenue—and losses—are ballooning. The filing Wednesday gives the most-detailed financials to date of We Co., which was known as WeWork Cos. before a recent name change. From 2016 through 2018, the provider of trendy office space more than quadrupled its revenue to $1.82 billion. Its annual loss also mounted to $1.61 billion.

We’s IPO will be the latest test of the public’s appetite for a startup that loses scads of money, with the added twist of being viewed as a quirky business headed by an executive who is even more intertwined with his company than is typical for startup CEOs. The filing details hundreds of millions of dollars of real-estate deals and past personal loans involving the firm and Adam Neumann, its co-founder and chief executive, in addition to his super voting status and a big bonus tied to taking the New York-based company public.

It’s standard practice for WeWork and other office leasing companies to give tenants breaks on rent for a while, and no doubt that is driving up WeWork’s costs for its workspace locations related to the revenue it’s bringing in from the buildings. But WeWork’s numbers belie the notion that the company is simply incurring losses for funding its expansion.

The company right now is eking out a slim base profit simply from the revenue it takes in minus the bare minimum costs to run its buildings. The revenue for each WeWork tenant also is declining. WeWork attributes the decline to its expansion into countries with lower standard prices for tenants and to discounts it dangles to persuade tenants to sign longer-term subleases.

The financial disclosures make it clear that WeWork — which, it should be said, is a commerce office leasing company and not truly a tech company — shares the hallmarks of Uber Technologies Inc. and other high-profile young technology startups.

At this point in WeWork’s life, it’s tough to assess whether the company is economically viable in the long term. Its growth is overwhelming, but it’s not clear that it got there in a sustainable way. This company is a leap of faith, as are many of the young tech-ish companies hitting the stock market. Many of them have done poorly as public market stocks.

Todd “Bubba” Horwitz

IN ASSOCIATION WITH

Financial Markets and Political Commentary
 

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About the author

Todd Horwitz - Author of “Average Joe Options“. Todd began his trading career in 1980 at the CBOE. He was one of the original traders in the OEX & helped start the SPX. He is a member the CME where he trades S&P futures as well as foreign currencies & is a regular contributor to CNBC, Bloomberg, BNN, Fox & many other major news networks.