As expected, WeWork - or "the We Company", as its struggling to rebrand itself - published on Wednesday the prospectus for its hotly anticipated IPO, which it confidentially submitted to the SEC months ago.
Of all the 'tech' darlings that have either recently IPO'd, or are expected to in the near future, WeWork's business so far has involved burning ever-more cash (roughly in line with revenue growth) while its CEO, Adam Neumann, shares his grandiose, expansive vision to build an office-space leasing company, that's also a provider of adult dorms, and a private school, and generalized lifestyle company.
To back up that vision with numbers, Neumann's company listed its Total Addressable Market in its S-1 as $3 trillion, equivalent to roughly 15% of the US economy. Of course, that's entirely unrealistic.
WeWork generated $1.54 billion in revenue in the first six months of 2019 and posted a net loss of $904 million, while losing an insane $1.4 trillion from operations. Astonishingly, the company has been valued at $47 thanks to VC investments by Soft Bank and other large institutional investors.
What is more stunning is that the higher its revenue, the greater its losses, as shown below.
The IPO will leave WeWork with three classes of common stock, adding to its already complicated structure, which is set up to provide tax benefits to Neumann and other early investors.
This is almost as straightforward as Alibaba's org chart pic.twitter.com/73vrNotjZd— zerohedge (@zerohedge) August 14, 2019
In the filing, WeWork said it's "reinventing" the way people work and "relate to the workplace" (admittedly, an appealing turn of phrase).
"We are reinventing the way people work and transforming the way individuals and organizations relate to the workplace," the company said in the filing. "When we started, it was obvious to us that the solutions available in the market were not meeting the needs of the modern workforce."
The listing is being finalized as WeWork hopes to sow up another $6 billion asset-backed financing package. That package is reportedly contingent on WeWork raising at least $3 billion from its IPO, which it's expected to do.
However, with the recent bout of market turbulence, the company, which had reportedly hoped to hold its debut in September, might need to postpone. Which brings shareholders even closer to the abyss. After all, WeWork's business model isn't well-situated to withstand a recession, given the mismatch between the long-term leases it signs with buildings (some of which are owned by its CEO) that it rents, and short-term leases it offers its customers.
Then again, Neumann owes his bankers a big favor, since they help transform him into a fabulously wealthy individual overnight.
WeWork's underwriters have extended a $500,000,000 line of personal credit to WeWork's CEO, of which $380,000,000 is outstanding.— SheepleAnalytics (@SheepleAnalytic) August 14, 2019
They have also extended him $97.5 million more to buy real estate and personal property.
IPO!@zerohedge @DavidBCollum pic.twitter.com/dmpk1K1DvK
But at least we can all expect more bad poetry like this.