The coworking startup, WeWork, filed to withdraw its IPO Monday (30/9) in a part of recent strings of disappointing IPOs for startups as reports of huge losses and bad governance surfaced. Established in 2010, WeWork is a coworking service company that provides open working spaces for the public. The company planned an IPO in order to obtain more funds for its operations, as it uses the common usage of “burning” funds to gain growth. However, the company’s unethical methods and its tendency to use money recklessly turned the company’s IPO to become its downfall.
The company itself has decided to suspend its objective to go public, keeping their aim on focusing their fundamental core of the business. The SoftBank-backed group’s potential IPO valuation dropped as low as $10 billion, from $47 billion in January. In addition, the company CEO, Adam Neumann was ousted as a 220-page report filed to the Securities and Exchange Commission shows the shady underworkings of the CEO.
The We Company reportedly originally wanted to tap a $6 billion credit line that was contingent on it raising at least $3 billion in an IPO completed before the end of this year. Which, now, the option appears to be off the table. Instead, the cash-burning company may need to turn to other sources of capital – potentially new or existing venture capital investors - while working to trim costs. In recent days, there have been reports that The We Company could put multiple businesses up for sale and sell off a private jet used by the former CEO. Bitterly, the company lost a staggering $1.9 billion last year, according to its IPO prospectus while during the first half of 2019, it lost $904 million. All in all, the future looks bleak for the coworking space company.
Sources: Bloomberg CNBC Reuters
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