WeWork failed in its strategy of becoming a public company, at least for now. The collapse is a blow to the projected expansion for the months and perhaps two or three years later, since it will force to rethink the strategies. For some, it is the first failure of the new companies that emerged in this century and it could be the warning that the business models of other companies should be reviewed.
This Monday WeWork he announced to the New York market that he was definitely abandoning his efforts to launch a Initial Public Offer of Shares (IPO), after weeks of turbulence about the measures taken by the company for its IPO, they never convinced investors that skeptics could not understand whether the issued action would be backed by a technology company or the real estate sector. Uncertainty factors such as those mentioned above caused one of the biggest failures of the market in the present century, few companies announce their intentions to issue equity securities and do not comply either because they are not authorized or because the market rejects them, it is likely which in this case deprived the latter.RELATED
However, the company said it will issue shares at some point, although it did not set an estimate of the time it would do so or if it would try in a market other than New York, something that is unlikely. WeWork's expectation was aimed at attracting up to 3 billion dollars for the launch of the IPO, which would be complemented by a loan of 6 billion dollars that would be largely obtained with the support of becoming a public company. The banks would have pledged to lend to the company only if it raised at least $ 3 billion in the IPO, which made clear everything that was at stake.
Lee: The Latin American businessman who surprised George Soros
Story of a failure announced
WeWork It has never registered profits since it was born in 2010, that was the first contradiction and risk factor that potential investors detected and that the company's executives were not able to anticipate despite the fact that one of the fundamental indicators in the world For any investor that is respected, it is precisely that of earnings and its relationship with other company figures; for example, profit vs. capital, profit vs. investments, etc.
It was only the beginning; at the beginning of September they met rumors that the company would accept a maximum valuation of 20 billion dollars in its IPO, and not 47 billion, was another sign of that the company did not find a point of comparison that would provide certainty and the imperative need for money.
The resources were necessary for the New York-based company, which rents furnished offices for companies and freelancers, to finance its worldwide expansion., additionally investing in a wide range of businesses and properties such as departments and schools, as it had transpired. The company's problems began since last year when one of its main investors, the Japanese bank Softbank refused to inject 16 billion dollars that had previously agreed.
Thus, as the months passed the pressures accumulated and the IPO began to falter, last August some analysts began to doubt about the financial strength of the project, launching indirectly Questions to senior management, specifically: how would they support the model? How do you get money? Are you at risk of bankruptcy if you can't get cash? What is the company, a technology or real estate company? In fact, the IPO has been postponed for some months.
Specifically, the doubts focused on the fragility of a commercial model not fully tested or with high risks, similar to that of Uber, a company whose action has constantly collapsed since it was released. In case all the above is not enough, the company's Board of Directors decided just last September 18 that its co-founder Adam Neumann left the position of CEO to give way to a double internship, although he would maintain his position as president; the interim directors sought to find a new CEO who injected confidence to the investors in the IPO process, time did not reach and WeWork had to leave, for now, his plans to reach Wall Street.
Two words rumble in the We Work buildings: cuts and divestments. The management of the company seriously analyzes making personnel cuts in all facilities where it is physically located, as a measure to reduce its costs and go to a more orthodox administration of resources with the aim of becoming attractive at some point to The stock market. Additionally, it could carry out divestments in some countries where it has operations, also to finance its activities and eventual expansion in places where it has or detects greater profitability potential.
Time is short, some versions indicate that the company begins to run out of the cash necessary to maintain its operations, although for the moment they do not consider it to be a high-risk situation, they do say that alerts have been turned on.