Dr. Gleb Tsipursky – The Office Whisperer
Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
Drew Jones – Design & Innovation
Jonathan Price – CRE & Flex Expert
The start difference between the valuations of IWG Plc and WeWork has once again come under scrutiny.
Although both companies provide a similar flexible workspace offering, WeWork was valued at $9 billion when it started trading in October 2021 despite its much-publicized IPO flop just two years earlier. The company has accrued billions of dollars’ worth of losses since launching in 2010 and hasn’t yet made a profit.
IWG, however, has been around since 1989 and in addition to decades of experience, the company has profit and size on its side, too. Yet it has a market capitalization of less than half of its competitor, coming in at just over $4 billion.
So why is WeWork valued higher than its more established, profitable rival?
“A lot of my investors can’t understand [IWG’s] valuation gap with WeWork,” said James Hanbury, from Brook Asset Management, in an interview with the Financial Times.
WeWork’s listing on the NYSE, which typically commands higher valuations than London, was one possible factor. And despite a number of disasters for WeWork in recent years, including the departure of its founder and CEO Adam Neumann, Hanbury suggested that investors in WeWork are looking to a brighter future with new boss Sandeep Mathrani and SoftBank, the company’s Japanese backer.
As for IWG, Michael Donnelly, an analyst at Investec, suggested that investors were pricing IWG on current performance – including a profit warning earlier this year. IWG was one of many flexible space operators that has been hampered by the pandemic. Going forward, it is expected that flexible space will become more attractive as uncertainties over the pandemic continue.
Could the difference be down to the style or location of workspace? IWG has traditionally favored suburban and out-of-town locations, while WeWork has often chosen iconic, centrally located buildings.
There’s no clear answer. For reasons of their own, some investors appear to favor WeWork over IWG. But for a company that hasn’t yet made a profit, it remains to be seen how long this will last.
