WeWork postpones IPO after frosty investor response

WeWork owner The We Company has postponed its initial public offering (IPO), walking away from preparations to launch it this month after a lackluster response from investors to its plans.

The US office-sharing start-up was getting ready to launch an investor road show for its IPO this week before making the last-minute decision on Monday to stand down, people familiar with the matter said. The company has been under pressure to proceed with the stock market flotation to secure funding for its operations.

In the run-up to the launch of its IPO, We Company has faced concerns about its corporate governance standards, as well as the sustainability of its business model, which relies on a mix of long-term liabilities and short-term revenue, and how such a model would weather an economic downturn.

Reuters reported last week that We Company might seek a valuation in its IPO of between NIS 35.5 billion and NIS 42.7 billion, a dramatic discount to the NIS 167.1 billion valuation it achieved in January.

“The We Company is looking forward to our upcoming IPO, which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment,” the company said in a short statement.

Were The We Company to have pressed on with the IPO at such a low valuation, it would have represented a major turning point in the growth over the last decade of the venture capital industry, which has led to the rise of start-ups such as Uber Technologies Inc, Snap Inc and Airbnb Inc.

The We Company’s decision to delay its IPO indicates it did not feel confident that the corporate governance changes it unveiled on Friday, slightly loosening CEO and co-founder Adam Neumann’s grip on the company, was enough to woo investors concerned about its lack of a path to profitability.

The We Company had said it was making the changes “in response to market feedback”. It said Neumann’s superior voting shares will decrease to 10 votes per share from 20, though he will retain majority control of the company.

Neumann will also give the company any profit he receives from real estate deals he has entered in to with We Company. He will also limit his ability to sell shares in the second and third years after the IPO to no more than 10% of his stock. No member of Neumann’s family will be on the company’s board and any successor will be selected by the board, scrapping a plan for his wife and co-founder, Rebekah Neumann, to help pick the successor. Rebekah Neumann serves as the chief brand officer.

The WeWork brand is strongly tied to Neumann, a freewheeling 40-year-old Israeli-born entrepreneur who has said that The We Company’s mission is “to elevate the world’s consciousness.” (Reuters)