We Work delays IPO after frosty response

LOW VALUATION

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

The U.S. office-sharing startup was getting ready to launch an investor road show for its IPO this week before making the lastminute 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 US$10 billion and US$12 billion, a dramatic discount to the US$47 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 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 past decade of the venture capital industry, which has led to the rise of startups such as Uber Technologies Inc, Snap Inc and Airbnb Inc.

It would have meant that We Company would be valued at less than the US$12.8 billion in equity it has raised since it was founded in 2010, according to data provider Crunchbase. And it would have been a blow to its biggest backer, Japan’s Soft Bank Group Corp, at a time it is trying to amass US$108 billion from investors for its second Vision Fund.

Soft Bank was discussing supporting the IPO by snapping up shares worth between US$750 million and US$1 billion, the sources said. However, We Company decided on Monday that even with Soft Bank’s support, the IPO would have raised a little over than US$2 billion, short of its target of at least US$3 billion.

This target is tied to a US$6 billion credit line We Company secured from banks last month, that calls for an IPO to take place by the end of the year and raise at least US$3 billion, one of the sources said.

Were the New York-based company to fail to meet this target by the end of the year, it would need to secure alternative funding.

The Wall Street Journal first reported on the potential IPO delay.

Reuters