WeWork is on course to report losses of $1.5 billion (£1.1 billion) this year as the flexible-working giant gears up for a listing valuing it at about $9 billion.
The company is scheduled to make its long-awaited debut on the New York Stock Exchange on or around October 21 via a merger with BowX, a special-purpose acquisition company (Spac). But the projected losses, disclosed last week in an investor presentation, have cast a shadow over the float.
After losing about $5 billion over the past three years, WeWork boss Sandeep Mathrani is seeking to convince investors that the company is primed for recovery. Occupancy at its 762 global sites — which slumped to 47 per cent during the pandemic — rallied to 61 per cent in the three months to September. The company said its 60-plus sites in London accounted for more than 35 per cent of all leasing activity in the capital in the second quarter.
WeWork’s financial performance was dented this year by $793 million of costs arising from quitting sites and a settlement with its idealistic co-founder Adam Neumann, who was ousted in 2019 after WeWork was forced to scrap earlier plans for a float.
Despite attaining a $47 billion valuation in a fundraising led by Japanese tech giant SoftBank earlier in 2019, investors baulked at WeWork’s hefty losses and its practice of taking out long-term leases on office space, carving it up and sub-letting on short-term deals.
As he rode high on global expansion, Neumann plotted a number of spin-off ventures including WeBank. Quizzed over the disconnect between WeWork’s colossal losses and its lofty valuation, Neumann put it down to the company’s “energy and spirituality”.
After WeWork’s failed listing, SoftBank led an emergency refinancing that left Neumann with a 10 per cent stake. This would put him in line for a potential payday of almost $1 billion from this month’s float.
Mathrani, who used to lead the retail group of real estate giant Brookfield, has extricated WeWork from more than 150 locations since the onset of the pandemic, and he told investors last week that the company’s downsizing was largely complete. But one landlord to the group said he expected WeWork to leave more buildings because it had committed to leases that would prove unaffordable.
The merger with BowX, a Spac established by technology entrepreneur and Sacramento Kings basketball team owner Vivek Ranadivé, will provide WeWork with about $1.3 billion of cash. The company’s debts total $4.58 billion.
WeWork forecast that underlying earnings would recover to $243 million next year before rising to almost $2 billion in 2024. The company projects that sales will almost triple from $2.66 billion this year to $6.79 billion.
In its investor presentation, it disclosed that SoftBank had nominated Véronique Laury, the former chief executive of B&Q owner Kingfisher, to join its board as a non-executive director.
The Times (Sam Chambers) - https://www.thetimes.co.uk/article/wework-reveals-losses-ahead-of-9bn-float-dg6jbn5hf