WeWork To Register Its Securities On SEC; A Quick Look At WeWork And Its IPO

  • September 10, 2019 11:00 PM AEST
  • Team Kalkine
WeWork To Register Its Securities On SEC; A Quick Look At WeWork And Its IPO

Started in the year 2010, WeWork has spent the last nine years building a founder-led, community company which helps businesses in finding the right office space for their operations. The company’s business is built on a global platform of physical locations where it offers access to workstations and in return receives membership fees which is one of the main sources of revenue.

The We Company, the parent company of WeWork, is currently planning to go public and register its securities on U.S. Securities and Exchange Commission (SEC). Last month, the company released a S-1 filing in which it announced that it is planning to raise a maximum of $1 billion via IPO.

Reasons behind the IPO

The main reasons for this offering are:

  • to increase the company’s capitalization and financial flexibility;
  • Enable access to the public equity markets for the company and its stockholders;
  • Create a public market for its Class A common stock;

The company is planning to use the net proceeds of this offering for general corporate purposes, including working capital, operating expenses and capital expenditures

Business Model

The company monetize its global platform by:

  • Selling memberships;
  • Extending its platform beyond offering workspace;
  • Providing ancillary value-added products and services to its members;

Currently, the company derive most of its revenue from recurring monthly membership fees, which accounted for approximately 83% of total revenue during the six months ended June 30, 2019. Since 2014, the company’s membership base has grown by over 100 per cent each year.

Financial Performance
In 2018, the company incurred a loss of $1.93 billion, substantially higher than the net loss of $933.5 million in 2017. For six months ended 30 June 2019, the company reported a net loss of $904.65 million. As at 30 June 2019, the company had Cash and cash equivalents of $2,473 million.

Financial Performance (Source: Company Reports)

 Opportunity

The company believes that the below-mentioned trends will allow it to continue to grow its business:

  • Urbanization- People are moving to major global urban centers, prioritizing greater accessibility to services and increased human connection;
  • Globalization - The world is increasingly connected through trade and the movement of capital, people and information across borders;
  • Independent workforce- People are increasingly engaged in independent work;
  • Flexible solutions- Individuals and organizations are increasingly looking to lower fixed costs by converting long-term lease obligations into flexible solutions that can expand and contract with their evolving space needs in a capital-efficient manner;
  • Workplace culture -People are increasingly seeking environments that humanize the work experience;
  • Sharing Economy -People are demonstrating a greater willingness to share, driven by a desire for value, quality and variety.
Growth Strategy

The company is currently focused on long-term sustainable growth strategy and intends to grow by:

  • Expanding in new and existing markets
  • Enhancing product and service offerings
  • Lowering upfront capital costs and improving operational efficiency
  • Developing and strengthening relationships with enterprise members
  • Investing in technology

The company recently launched or acquired new solutions, products and services that it believe will add value to its members and have the potential to become meaningful revenue streams in the future.

Leadership team

The company’s leadership team include well-seasoned industry veterans who have a proven track record of leading successful tech-enabled services businesses.

The company’s Leadership team include:

  • Adam Neumann (Co-Founder, Chief Executive Officer and Chairman of the Board)- One of the company’s co-founders who has served as Chief Executive Officer and Chairman of the Board since its inception;
  • Jennifer Berrent (Co-President and Chief Legal Officer) - Served as one of the company’s Presidents since April 2019 and as Chief Legal Officer since June 2016;
  • Michael Gross (Vice Chair) - Served as the company’s Chief Financial Officer from 2013 to 2015 and has previously served as Chief Executive Officer of Morgan Hotel Group;
  • Arthur Minson (Co-President and Chief Financial Officer)- Served as one of the company’s Presidents since June 2015 and as its Chief Financial Officer since June 2016.
Benefits of WeWork Platform to Business:

WeWork Platform provides several benefits to its businesses which includes:

  • Reduce capital expenditure - By amortizing WeWork’s standard fit-out contribution over its long-term leases, and charging members only for the time that they occupy the space, WeWork avoid burdening its members with all-in capital expenditures;
· Stabilize expenses – WeWork offer a fixed rate with annualized escalations on property    costs, operational expenses, amortized capital improvements, and management fees,     providing predictability and stability for every real estate budget; · Optimize committed Liability- WeWork provide shorter-term memberships, compared to   market-standard leases—resulting in reduced balance-sheet liabilities; · Increase real estate adaptability - At WeWork, businesses consume real estate more     efficiently by paying only for the space they need; · Achieve greater spatial efficiency- WeWork enables businesses to use space more        efficiently.

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