After reports that WeWork is planning to slash their massive $47 billion valuation by well over half, it is untelling whether the company’s long-awaited initial public offering will happen this year at all.
If the IPO does proceed, WeWork’s largest backer SoftBank could stand to lose at least $2.6 billion, so it is likely they are trying to postpone it.
Still, WeWork may still go forward with the IPO for the simple fact that it needs the capital. Going forward, the company has two options: privately raise more money from SoftBank and postpone the IPO, or go public and potentially experience big losses while still raising cash to fund its growth into 2021.
Keeping the company private could provide SoftBank with a safety net from its initial investment into WeWork. SoftBank is also gearing up to raise $100 billion for a Vision Fund 2, and showing losses on Vision Fund 1 could hurt those chances. Considering WeWork consists of 11% of SoftBank’s Vision Fund 1, they have a lot to lose.
It is clear that WeWork seems to be backed into a corner with it’s continuous financial losses and lack of profitability. Additionally, questionable business practices revealed in the company’s S-1 filing raised numerous red flags, like CEO Adam Neumann buying properties and leasing them back to WeWork.
