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After WeWork filed its pre-IPO prospectus, some may wonder whether to invest into the $47 billion valued company, but revelations from the S-1 are leaning towards it not being the best choice.
The S-1 revealed that the We Company is burning through cash, as it doubled its revenue and losses for the first half of 2019. The company experienced $904 million in losses in that time frame.
We operates by signing long-term leases, then subleasing them out on shorter terms. In the case of a recession, this could cause We members to cancel their memberships in lieu of something cheaper.
Many were stunned when We received a private market valuation of $47 billion as many found it to be highly overvalued. In comparison, We’s competitor IWG is much larger and only has a valuation of $3.7 billion.
We’s growth is also limited as it continues to expand into international markets where prices are lower than the one it currently services. If the company is already experiencing an issue with increasing its average revenue per member, it could run into more problems in the future.
We’s corporate structure gives control of the company to CEO Adam Neumann and his wife Rebekah. The S-1 devoted five pages of potential conflicts of interest for Adam, including properties he owns and leases to We.
Along with this point, We’s structure saves taxes for Adam and Rebekah through its Up-C. This structure saves Neumann and other executives taxes on any profits at an individual income-tax rate.
