WeWork goes public. Here’s what you need to know.
Exactly two years ago, Marcelo Claure was sitting in his Miami office at midnight, explaining to Adam Neumann why he had to give up control of WeWork.
The chief operating officer of
WeWork’s largest investor, Claure had been tasked with finding a solution to a financial, operational and public relations crisis that left the short-term office rental company struggling to survive.
“We shook hands, and I said that was how the deal was going to go,” Claure said in an interview with Barron. âIt was a very moving conversation. I said to Adam, ‘We trusted you for over $ 10 billion, and things didn’t go as planned. It’s time you trusted us to pursue your vision. ‘â
Claure noted that he was uncertain whether Neumann would agree to SoftBank’s plan to fix the company – which required the Tokyo-based investment firm to increase its financial commitment – given that Neumann had absolute control over the company. company. But Neumann agreed to the SoftBank plan, which involved a new $ 5 billion commitment from SoftBank, in addition to a previous investment of $ 9.1 billion. That week, Claure became executive chairman of WeWork, a role he still holds today. “We had a choice: to guarantee or to double down,” he said.
And on Thursday, just two years after its near-death experience, WeWork is now a public company, with a valuation of around $ 9 billion. Last week, Claure took an overnight flight from Brazil to ring the bell for the New York Stock Exchange, where WeWork will now trade under the symbol “WE”. We work made a merger with the ad hoc acquisition company
BowX Acquisition Company
, an operation first announced in March.
That’s a stunning result for WeWork and SoftBank, which remains the company’s largest investor, with a 56% stake. The listing comes just two years after the disastrous collapse in September 2019 of a planned WeWork IPO. Two months later, SoftBank reduced its stake in WeWork by $ 8.2 billion, including $ 3.5 billion for the SoftBank Vision Fund, the company’s $ 100 billion venture capital portfolio. WeWork had grown too far, too fast. For this, Claure said, Neumann only has part of the blame.
âWhat Adam did was madness, opening nearly 1,000 buildings in two years,â he said. Barron. “There was this growth mentality at all costs, but it wasn’t entirely Adam’s fault.” Claure said his boss – CEO and founder of SoftBank, Masayoshi Son – was at least partially responsible. âMasa was at fault too. But Masa learned his lesson. We were all mature enough to learn from our failures.
Claure recalled that two years ago he took a much less pleasant trip to New York City to begin the WeWork repair process. âWe were a company at war with its employees,â he said. âThey were shocked that the company was on the verge of bankruptcy as a few weeks earlier they were celebrating a potential IPO. We were at war with our owners. We were at war with our clients, including the big Fortune 100 companies. And we were at war with the media.
Over the past two years – and in the midst of a global pandemic – WeWork has reorganized its operations, slashing costs, drastically reducing headcount, reorganizing its capital structure and severing ties with Neumann.
“Today is a testament to our company’s determination not only to transform our business, but also to adapt and deliver the options that today’s workforce demands,” the CEO said on Wednesday. Sandeep Mathrani in a statement. âAs businesses around the world reinvent their workplace, WeWork is uniquely positioned to deliver the space and services that can power solutions based on flexibility. “
We work said recently Preliminary third-quarter revenue was $ 658 million, up about 10% from the second quarter, and including $ 228 million in September, the highest monthly total in 2021. The Total occupancy rate was 60% at the end of the quarter, down from 52% a quarter earlier. âGross office salesâ totaled 154,000 during the quarter, or approximately 9.2 million square feet sold. New office sales during the quarter totaled 84,000.
The company reduced spending by $ 1.1 billion from the fourth quarter of 2019 and divested all of its non-core businesses. WeWork said it has terminated more than 150 leases and changed the terms of 350 others, reducing rent by about $ 400 million on an annualized basis.
In a presentation Regarding the BowX transaction, WeWork noted that during the June quarter, the company represented disproportionate portions of leases signed in some key markets, with 37% of the overall market in London, 32% in Boston, 23% in New York, 14% in Paris and 12% in San Francisco. In the same presentation, WeWork’s forecast revenue will hit $ 4.3 billion next year, $ 5.7 billion in 2023, and $ 6.8 billion in 2024, with Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization, from $ 243 million in 2022, $ 1.3 billion in 2023, and $ 2 billion in 2024. Once a cash devourer, WeWork hopes to become a cash machine.
Meanwhile, Claure noted that WeWork has expanded its business model. The company created an app that âUberized the Office,â making it easy to book office or conference rooms by the week, day or hour, for an entire office or building. They have launched a membership program called “All Access” which makes it easy to reserve space in any WeWork building around the world. The company has created a software-as-a-service model, licensing its reservation software for use by other companies who wish to manage their own office capacity. And it is managing certain buildings for third parties who do not want to directly take care of the work.
There are other strange elements in the history of WeWork. Neuman still has a stake of around 9%, subject to a lock-up agreement for the next nine months, although he does not have a seat on the board. Meanwhile, taking into account past write-offs, the current book value of SoftBank’s stake in WeWork is $ 2.9 billion. This would imply that in the December quarter, if the share price is stable, we could see SoftBank register a $ 2 billion gain on its stake in WeWork. But SoftBank’s bet on WeWork remains sizable: The company has $ 5.05 in debt commitments to WeWork, including a $ 1.75 billion credit facility guarantee, a $ 2.2 billion senior unsecured loan. (which has been used) and an unsecured senior loan of $ 1.1 billion not yet drawn.
But what’s really amazing is that Neumann’s vision for the future of commercial real estate may finally come to fruition. Claure believes the company is now enjoying “incredible tailwinds”, helped in part by the trend towards hybrid work that has emerged from the pandemic period. âI couldn’t be more optimistic about the company,â he said. Claure says that over time, flexible workspaces will represent 30% of the commercial office market, compared to 1% to 2% today.
As the commercial office market faces competition from the work-from-home trend, Claure sees it as a âplus, more, moreâ for WeWork’s model. âThe world will never come back to 9 to 5 days at company headquarters,â he said. âThe world is moving towards a star model, with a decentralized workforce and flexible working days. We’ve all learned that there are a lot of things we can do in a home office or in a WeWork, instead of commuting for an hour. Suddenly, our valuation proposal becomes incredible.
Write to Eric J. Savitz at [email protected]