The start difference between the valuations of IWG Plc andย WeWorkย has once again come under scrutiny.ย ย
Although both companies provide a similar flexible workspace offering,ย WeWorkย was valued at $9 billion when it started trading in October 2021ย despite itsย much-publicized IPO flop just two years earlier.ย The company has accrued billions of dollars’ worth of lossesย since launching in 2010ย and hasnโt yet made a profit.ย
IWG, however, has been around since 1989ย andย in addition to decades of experience,ย the companyย has profit and size on its side, too. Yet itย has a marketย capitalizationย of less than half of its competitor, coming in atย just over $4 billion.ย
Soย whyย isย WeWorkย valued higher than its more established,ย profitableย rival?ย
โA lot of my investors canโt understand [IWGโs] valuation gap withย WeWork,โ said James Hanbury, from Brook Asset Management, in an interview with the Financial Times.ย
WeWorkโsย listing on the NYSE, which typically commands higher valuations than London, was one possible factor.ย And despiteย a number of disastersย forย WeWorkย in recent years,ย including the departure of its founder and CEO Adam Neumann,ย Hanbury suggested thatย investors inย WeWorkย are looking to a brighter future with new boss Sandeepย Mathraniย and SoftBank, the companyโs Japanese backer.ย
As for IWG,ย Michael Donnelly, an analyst at Investec, suggested thatย investors were pricing IWG on current performanceย โ including a profit warning earlier this year. IWG was one of many flexible space operators thatย hasย been hampered by the pandemic.ย Going forward, it is expected that flexible space will become more attractive as uncertainties over the pandemic continue.ย
Could the difference be down to theย style or location of workspace? IWG has traditionally favored suburban and out-of-town locations, whileย WeWorkย has often chosen iconic, centrally located buildings.ย
Thereโs no clear answer. For reasons of their own, some investors appear to favor WeWork over IWG. But for a company that hasnโt yet made a profit, it remains to be seen how long this will last.
