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When could the WeWork IPO happen?
There is no confirmed date for the WeWork IPO. The company filed to go public in August 2019, but it is unclear exactly when the IPO will happen.
How to trade the WeWork IPO
If you want to trade the WeWork IPO, you can do so before and after the listing. Here’s how:
Before the IPO
IG is offering a ‘grey market’ on WeWork, which enables you to speculate on the company's share price before it lists.*
With a grey market, you can:
- ‘Buy’ if you think the market cap will go up from the grey market price
- ‘Sell’ if you think the market cap will go down from the grey market price
*The grey market price is based on our prediction of the WeWork market capitalisation at the end of the first trading day.
WeWork's grey market
|WeWork grey market||£2/$1||$1||4pts||25%|
What is WeWork likely to be valued at when it lists?
WeWork is likely to be valued at $20 billion to $30 billion when it lists. The figure has been slashed from $47 billion – which was the valuation the company received in January 2019 – due to a lack of investor interest. The valuation before the previous was $20 billion (in July 2017), but increased significantly after a major investment from Softbank.
Our analysis on the WeWork IPO
WeWork provide co-working office space in 124 cities across the world and will soon make their debut on the US stock market. While its business model of renting buildings and subleasing space to tenants at a higher rate is not revolutionary, the company has grown at an astonishing rate which has captured the imagination of big investors, including SoftBank’s Vision Fund and Goldman Sachs.
WeWork CEO Adam Neumann believes the company is more than just an office space provider, claiming to be a pioneer of the sharing economy, connecting workers to office space and changing the way people work. In its recently published IPO prospectus, WeWork romantically stated that their mission was to 'elevate world consciousness'. In reality WeWork compete with other office space providers, including UK-listed holding company IWG which owns a suite of companies such as Regus and Spaces.
While high growth and a big-vision message has fashioned a multi-billion-dollar valuation, investors should be concerned with the rate at which WeWork is burning through cash to maintain its rate of growth. Last year, WeWork reported that for every $1 they earnt in revenue, they spent close to $2. Even Uber eats through its cash pile at a slower pace.
Although it is routine at this stage of the cycle to see firms go public without ever having a generated a profit, these are usually technology firms – which WeWork is most definitely not. Its IPO prospectus also lacks substance on how the company plans to achieve profitability in the future. WeWork is estimated to manage around 47 million square feet of office space, so based on its 2018 revenue, this translates to $38.77 in revenue per square foot. In comparison, IWG generate $59.39 per square foot whilst managing to be profitable too.
|Net income ($m)||-1611||150|
|5-year revenue growth rate||122%||11%|
|Revenue / sq.ft||$38.77||$59.39|
|Market cap ($bn)||25.0||4.6|
1WeWork P/S ratio based on a valuation of $25 billion. IWG P/S ratio is based on its current share price.
A major risk for WeWork is a turn in the property market. WeWork take out long-term leases on its properties and generally agree shorter-term contracts with its tenants. If property prices and market rents were to fall, its tenants could demand lower rents, thus creating a further mismatch between revenue and costs.
Valuations for WeWork were recently slashed to around $20-30 billion from a previous eye-watering $47 billion. A $25 billion valuation would still give WeWork a larger market cap than General Motors, Morgan Stanley or Micron Technology. If valued using the same price-to-sales ratio as IWG, its valuation would plunge to around $2.5 billion.
WeWork’s mission statement includes 'redefining success as personal fulfilment, not just the bottom line'. Investors should hope that this sentiment is not reflected in WeWork’s future income statements.
What could the WeWork share price be when it floats?
It is not known what the WeWork share price will be when it floats. When the company decides to go ahead with the listing, an investment bank will use the appropriate valuation techniques to determine the price of the shares. The bank will also decide how many shares will be released to the public. After the IPO, normal supply and demand factors will determine the share price.
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Why is WeWork listing?
WeWork is said to be listing to secure a financing package. In other words, it wants to raise capital and pay off its billions in debts. That’s because although WeWork’s revenue has increased over the past few years, so have its liabilities.
What is the outlook for WeWork?
Despite losing a lot of money, WeWork is still growing, so the outlook remains positive. The expected IPO might attract more high-profile investors, which will be good news for the business. Future plans include expansion to countries such as China.
What is WeWork’s business model?
WeWork’s business model is renting out shared workspaces to entrepreneurs, freelancers, small businesses and more. It rents spaces from property owners and then sublets them at a higher price. The price per space depends on the location. Further to the rental income, WeWork also makes money by providing additional services for a fee.
Get the latest WeWork news
How has WeWork been performing?
While WeWork has been performing quite well in terms of revenue production, debts have also increased over the past few years. In 2017, revenue surpassed $900 million, and this figure doubled to $1.8 billion in 2018. Debt increased from $933 million to $1.9 billion in the same period. WeWork’s employee head count has also reflected this rapid growth, increasing from 2200 in May 2017 to more than 11,000 in August 2019. Membership has also expanded as well – going from 130,000 members in May 2017 to more than half a million in August 2019.
Who are WeWork’s competitors?
WeWork has quite a few competitors, such as International Workplace Group (IWG), Servcorp and Knotel. Shared workspaces aren’t a new notion, as some of WeWork’s competitors have been around since 1978. IWG listed on the London Stock Exchange in 2000, and it is a constituent of the FTSE 250. Though it is larger than WeWork in terms of reach and locations, WeWork is expected to have a much higher market cap than its rival when it lists. Servcorp is listed on the Australian Stock Exchange (1999), while Knotel (founded in 2016) is not a listed company.
What sets WeWork apart from its competitors is its vibrant workspaces – it appeals to a different market, also offering lower prices per head in some cases.
WeWork key personnel
There are 13 key executives on WeWork’s management team.
|Adam Neumann||Co-founder and chief executive officer|
|Miguel McKelvey||Co-founder and chief culture officer|
|Laurent Paris||Chief technology officer|
|Joanna Lee||VP marketing|
|Ed Granaghan||Chief administrative officer|
|Prabhdeep Singh||Global head of operations|
|John Reid-Dodick||Senior VP Culture|
|Anthony Yazbeck||Chief operating officer|
|Sebastian Gunningham||Vice chairman|
|Ramin Bozorgzadeh||Engineering director|
|Roee Adler||Executive VP product management|
|Eugen Miropolski||Chief product officer|
|Jen Berrent||Chief legal officer|
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How do IPOs work?
IPOs are released when a company decides to start selling its shares to the public. The company will decide how many shares it wants to offer, and the investment bank will decide on the initial price of the stocks based on supply and demand.
1Based on revenue excluding FX (published half-yearly financial statements, June 2019).