WeWork has never made a profit and admits that it may never do so. Yet it is trying to raise $3.5bn from investors. Will investors be seduced by 'tech company' hype?
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CHICAGO, ILLINOIS - AUGUST 14: A sign marks the location of a WeWork office facility on August 14, 2019 in Chicago, Illinois. WeWork, a real estate firm that leases shared office space, announced today that it had filed a financial prospectus with regulators to become a publicly traded company. would give WeWork and its underwriters pause for thought. Like WeWork, Uber has never made a profit and has no idea when – if ever – it will deliver one.
Of course, it is normal for a fast-growing early-stage company which is investing heavily in growth-friendly activities to make losses, even substantial ones. WeWork spends a prodigious amount on growth-related activities. In the first 6 months of 2019 alone, it expended $255m on readying new WeWork spaces for opening, $320m on sales and marketing and $370m on other “growth and development” expenses. WeWork claims that its enormous losses arise from its fast growth strategy.
from $16bn to $2bn earlier this year. But it won’t solve WeWork’s fundamental problems - high costs, inadequate revenues and a massive maturity mismatch that makes it extremely vulnerable to worsening economic conditionsSubstantially all of our leases with our landlords are for terms that are significantly longer than the terms of our membership agreements with our members.
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