The WeWork float: what the experts think
● Red flag “Lots of things are going awry in the global financial system,” said John Stepek on MoneyWeek.com. But the “warning signal” that is most worrying is “the potential listing of one specific company”: WeWork. If the trendy officespace provider manages to go public it will surely mean we’ve reached the peak of the market. It’s only “right at the top”, just before the bubble bursts, that you get “the critical mix of founder arrogance and investor credulity” needed to get away with valuations “that would be impossible to justify in more ‘normal’ times”. And WeWork has it all: “a visionary founder”, Adam Neumann, “who spouts TED-talkstyle garbage at every opportunity”; an old-school business model (renting office space to companies) given a “tech-ified sheen”; and an absurd valuation once put as high as $70bn. Its float plan also has features of the worst hallmarks of “the modern-day IPO” – shareholders will have “virtually no control” because of the founder’s “supervoting” shares.
We hope
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“The red flags are so numerous” that it’s hard to find “a bull, or even partial bull” ahead of this float, said Bloomberg. But they do exist. Investor Sandy Kory of Horizon Partners reckons that WeWork is “misunderstood” – and that it is a “hypergrowth” company poised to tap a $3trn revenue opportunity from its 280 targeted cities globally. Neumann may be mocked for describing WeWork as “a community” and “a state of consciousness”. But, in a fragmented, historically tech-averse industry, there is a real opportunity for a big player to disrupt the existing model with a new “platform”. Look what Amazon did to shopping.
● A little light reading
Yet what emerges from “the inspirational gibberish” in WeWork’s prospectus is its “continued massive cash burn”, said Robert Cyran on Reuters Breakingviews: annual losses mushroomed to $1.61bn in 2018. Think of it as the ideal prospectus for anyone after “light reading for the beach”, said Richard Waters in the FT. It isn’t “fiction”, but it “certainly stretches the boundaries of its genre”. Loss-making Uber, whose stock is languishing at new lows, “is probably enjoying being upstaged in the battle for the title of Year’s Most Controversial IPO”.