WeWork Files for IPO With Billions in Revenue and Losses
Coworking giant WeWork (WE) filed paperwork today for its initial public offering (IPO), throwing open the doors on financial details that included losses that topped $1.6 billion last year, as well as similarly outsized revenues and aggressive expansion plans, according to a filing with the U.S. Securities and Exchange Commission.
WeWork’s parent company, The We Company, submitted the S-1 filing which listed $1 billion as the targeted amount to raise from the IPO, though that targeted figure can often fluctuate. It said proceeds will be used for general corporate purposes, including working capital, operating expenses and capital expenditures.
The 9-year-old company released detailed financial statements which showed WeWork’s revenue grew at a staggering rate from $436 million in 2016 to $1.82 billion in 2018. However, in that time, its net losses increased from $430 million to $1.6 billion, with the number likely to keep growing.
In the first six months of this year, WeWork had $1.5 billion in revenue but posted a net loss of $690 million, an increase from the net losses of $628 million on $764 million of revenue in the same time last year.
The net loss figures are based on net losses attributable to WeWork, after backing out net losses attributable to non-controlling interests.
The majority of WeWork’s expenditures were attributed to “location operating expenses” which continue to balloon each year. The firm defines those expenses as the day-to-day costs of operating an open location, and noted that lease costs are its most significant expense in that bucket. Last year, it accounted for $1.5 billion of the company’s spending.
In the first half of this year, WeWork’s “location operating expenses” grew to $1.2 billion compared to the $636 million it spent during the same period last year.
And with the company currently operating more than 528 locations in 111 cities across 29 countries and as its rapid growth is expected to continue, the costs could continue to increase.
“This rapid growth places a significant strain on our existing resources,” WeWork wrote in the filing. “Difficulties associated with our continued growth could result in harm to our reputation and could have a material adverse effect on our business, including our prospects for continued growth, and on our financial condition, results of operations and cash flows.”
The firm counted 527,000 memberships with a 40 percent enterprise membership rate in the first half of the year. That compares with 268,000 memberships with a 30 percent enterprise membership rate in the prior-year period. Enterprise memberships, defined as organizations with more than 500 employees, typically sign membership agreements with longer-term commitments.
The firm said it estimates there are about 149 million potential members in its 111 cities. The firm said it expects to “expand aggressively” in its existing cities as well as launch in up to 169 additional cities.
“We have identified our market opportunity to be 280 target cities with an estimated potential member population of approximately 255 million people in aggregate,” the filing said.
The filing also lays out its potential conflict of interests with WeWork’s co-founder and CEO Adam Neumann, who has personally leased space to WeWork in several of his buildings and raked in millions of dollars, the Wall Street Journal reported.
The company’s valuation has ballooned from $97 million with its Series A in 2009, to $4.8 billion in 2011, $16 billion in 2015, and $47 billion in January, as Commercial Observer reported. J.P. Morgan Chase recently committed $800 million to a $6 billion debt package that depends on WeWork’s upcoming initial public offering raising at least $3 billion, Bloomberg reported.