The We Company filed its IPO prospectus earlier this month, with plans to go public next month in what will be the second largest IPO this year, just after Uber.
The company’s massive $47 billion valuation has, to say the least, shocked analysts and critics alike. The company’s model has consisted of burning through cash and expanding at a breakneck speed, which has caused it to carry huge risk factors in the face of a recession.
Additionally, WeWork’s services are not new to the market. IWG has been operating with an almost identical business model as WeWork for several decades now. IWG also has more square feet of office space, more revenue, and is actually profitable, yet still has a market cap of $3.7 billion.
While WeWork has around 20% less usable square feet of space than IWG, it still has five times as many lease obligations as of the end of 2018 due to geographic concentration and longer lease terms.
Due to WeWork concentrating on high-priced markets, such as New York and San Francisco, it pays much more per square foot than IWG.
Moreover, the company’s executive practices have also left much to be desired. For example, it was revealed that CEO Adam Neumann had been renting out his own buildings to WeWork, collecting rent from the firm for years. While there are plans to clear this conflict of interest, the fact that it ran under the radar for years is worrisome.
Overall, the questionable business model and not-so-favorable practices from executives will likely make for an unpredictable, rollercoaster of an IPO.
