WeWork IPO plan shows $690-million loss in first 6 months

Adam Neumann center co-founder and CEO of WeWork attends the opening bell ceremony at Nasdaq in New York. Office space-sharing company We Work is getting ready to go public adding to a growing list of tech businesses

Adam Neumann center co-founder and CEO of WeWork attends the opening bell ceremony at Nasdaq in New York. Office space-sharing company We Work is getting ready to go public adding to a growing list of tech businesses

WeWork Cos Inc.'s prospectus for its initial public offering, published on Wednesday, is a similar tale.

Whereas ambitious startups were once content with saying they merely wanted to make the world a better place, WeWork says its company mission is to do no less than "elevate the world's consciousness", a phrase that raised eyebrows on social media among journalists who had spent the morning digging into the documents.

Chief Executive Officer Adam Neumann faces persistent questions about WeWork's propensity to burn cash. That's a lot of headgear. "Average revenue per WeWork membership has declined, and we expect it to continue to decline, as we expand internationally into lower-priced markets", the company said.

While WeWork is the flagbearer, several operating models exist. If it happens, it'll be the second biggest tech IPO since Uber, and undoubtedly the most controversial. But look at how WeWork is generating its losses.

Investors are looking for a clearer picture of how the venture capital darling plans to chart a path toward profitability, and whether WeWork's business model can withstand an economic downturn.

While Adam Neumann would still command far more voting rights than any other investor based on that share distribution, that could change over the next decade. Despite his apparent importance he doesn't have an employment contract, meaning he could leave at any time in theory. Meanwhile, three of the banks underwriting the IPO have extended Neumann a $500 million credit line secured against his shares. The company plans to list its shares on the under the symbol "WE", although the exchange was not listed in the filing. "We have similarly entered into leases with landlord entities in which other members of our board of directors have a significant ownership interest".

But how can one put a value on the shares anyway?

WeWork, which began in 2010, had a loss of $689.7 million on revenue of $1.54 billion for the six months ended in June.

However, two of the year's most high-profile companies to go public, Uber and peer Lyft Inc, have struggled since, with investors wary of the pair's billions of dollars in losses and the absence of a timetable to reach profitability. It's staring down future payment obligations of $47.2 billion for long-term leases, but its committed revenue backlog from short-term tenants is $4 billion. Unlike a WeWork membership, those leases can't be cancelled easily.

However, the reaction to Neumann's questionable power finances is clearly marred with concern for WeWork's future, as well as his other investments.

We also can not stress enough how much WeWork is dying to mimic the office spaces of Google, Facebook, Microsoft and similar moneybags operations, even though it has nothing like the tech giants' level of income and capital expenditure.

The company has also been on an acquisition spree as it prepares to go public.

In case you've been unscathed by the gig economy, WeWork basically operates on the idea of providing flexible workspaces to freelancers, remote workers, entrepreneurs and small businesses.

"These broad market fluctuations may adversely affect the market price of our Class A common stock", WeWork said in its filing.

WeWork, the office-sharing, kegger-hosting phenomenon that has redefined the modern workspace, is also raising the bar for how much money a startup can lose and still be considered a buzzy investment. Public market investors should ask themselves if and why they're being invited to fill the gap.

WeWork, which says in the offering document that its corporate mission is no less than to "to elevate the world's consciousness", is on track to lose $2.7 billion this year from its operations, up from almost $1.7 billion last year.

If that's what you want to do, go and read something else now. WeWork investors might be about to find out.

Chris Bryant is a Bloomberg Opinion columnist covering industrial companies.

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