Discount

WeWork plans to massively devalue itself to save the IPO

Friday, September 6, 2019 by Snacks

This isn't how I imagined my dream IPO... According to WSJ, WeWork is thinking about dropping its valuation in order to IPO down to $20B-$30B. That's half of where it was. The last time WeWork raised money, its valuation reached $47B. This update is just a few weeks after it officially filed its IPO paperwork (aka "the S-1"). Here's what wounded the coworking unicorn:

  • What WeWork wanted: Investors to be sooo excited to own We stock that there would be overdemand, requiring an increase in the planned offer price.
  • What actually happened: The opposite. Powerful investors are telling WeWork the stock is too pricey, and nobody wants to buy at that price when it goes public soon.
  • The reason: Lack of transparency. The IPO paperwork WeWork issued last month didn't clarify key details about its (un)profitability. One investor called WeWork's S-1 "a masterpiece of obfuscation."
  • The result: WeWork's reportedly dropping the price, basically putting its stock "on sale for 50% off" so investors can get comfortable enough to buy shares at the IPO. None of this is official yet.
THE TAKEAWAY

Tough day for WeWork shareholders (they already exist)... Even though WeWork hasn't IPO'd, its employees, early investors, and venture capitalists already own shares (some as compensation for work). Now the stock could be worth 1/2 what We was hoping for. WeWork's valuation got (very) high as a private company, so when shares hit the public market (and anyone can buy them) their price could come down to reality.

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