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Two years after WeWork’s attempt to become a public company flared up Extraordinarily, the collaborative giant will begin trading on the stock market on Thursday, hoping investors will now believe in their hopes.
Earlier efforts resulted in WeWork’s dizzying growth, huge losses and worrying management style co-founder Adam Neumann. WeWork has new leaders who are cutting their spending and hoping to capitalize on an office space market ravaged by the pandemic. However, the company still has high growth targets, big losses and many empty desks at 762 locations worldwide.
“We are the right company at the right time,” Sandeep Mathrani, WeWork’s CEO, told investors this month. “I joined this company with an inverse cost structure. Over the last 20 months, we’ve focused on streamlining our operating expenses and getting our real estate portfolio right.”
Instead of an initial public offering, WeWork enters public markets by merging with a special purpose acquisition company, or SPAC. something crazy these days, and will be traded under the WE code. The deal is expected to raise up to $1.3 billion, an amount that includes stakes held by investment firms BlackRock and Fidelity. Before Thursday’s listing, WeWork said investors were valued at about $8 billion, which is part of the $47 billion valuation given to the company in 2019 before exploiting it.
WeWork rents office space and charges membership fees from customers, including freelancers, start-ups, and small and large businesses, to use it. His business is based on the belief that people may prefer the flexibility of such an arrangement to a traditional office lease that can last for years and has other burdensome conditions.
While flexible office space isn’t new, WeWork said its business will not only revolutionize the way people work, but it can also change the way people live and think. Mr. Neumann has attracted billions of dollars in investments, the largest of which came from Japanese conglomerate SoftBank. Recovering WeWork When it withdrew its 2019 IPO and was in danger of bankruptcy.
Investors in WeWork must decide whether to use any increase in the stock price to sell a portion of SoftBank’s 61 percent stake.
SoftBank may be willing to put together the $16 billion it has poured into WeWork, about $11 billion in equity investment, $5 billion in debt financing and payments to Mr Neumann.
“I made the wrong decision,” said SoftBank CEO Masayoshi Son last year. “I didn’t look right at WeWork.” SoftBank has agreed to keep its voting rights in the company below 50 percent.
The epidemic, which emptied office towers around the world, also shook WeWork’s business.
Traditional landlords survived because tenants were legally obliged to continue paying their years-long rent, most of which remained in effect. But WeWork’s customers were able to cancel their much shorter-term contracts when they expired. WeWork’s second-quarter revenue this year was $593 million, well below the $988 million it reported in the first quarter of 2020, its highest quarter.
And that partly explains why the company uses cash instead of generating cash. In the first half of this year, WeWork spent $1.31 billion in cash running its operations and purchasing property and equipment, this is more than $1.15 billion in the same period of 2020.
Still, WeWork has made significant strides in reducing operating expenses. Some of the biggest savings come from renegotiating or getting rid of leases with landlords. “We have exited more than 150 full leases per year and made 350 lease changes,” Mr. Mathrani told investors this month. “This has contributed to a significant reduction in our rental and tenancy costs, with savings of approximately $400 million per year.”
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