WeWork failed IPO

Valued at $47 billion as a tech unicorn. It leased buildings for 15 years and rented desks by the month.

Documented, foreseeable risks that were ignored anyway. The failure is attention, not information.

Room: Q1 Predictable
Year: 2019
Impact: $47B
Sector: Flexible office / coworking
Region: N. America
Category: Economic

Why this room

This is q1 because the fatal asymmetry was not concealed; it was printed in the company's own registration statement. The S-1 disclosed $47.2 billion of future undiscounted minimum lease payment obligations against $4.0 billion of committed revenue backlog, with US leases running an average initial term of about 15 years while the revenue that serviced them sat on largely month-to-month member agreements. A long-dated fixed liability funded by cancellable short-dated income is an arithmetic exposure, not a hidden one, and the public market repriced it within six weeks of reading the document; the failure of attention belongs to the private investors who had set a $47 billion valuation on the same business eight months earlier.

The record

WeWork's S-1 disclosed future undiscounted minimum lease payment obligations of $47.2 billion as of 30 June 2019, against a committed revenue backlog of $4.0 billion and run-rate revenue of $3.3 billion at the same date.certain
The S-1 stated that the average length of the initial term of WeWork's US leases was approximately 15 years, while its member agreements were substantially shorter, with month-to-month commitments explicitly excluded from committed revenue backlog.certain
WeWork reported a net loss of $1.9 billion on revenue of $1.82 billion for 2018, and revenue of $1.535 billion with a net loss of about $0.9 billion for the six months ended 30 June 2019.certain
At filing the company operated over 528 locations in 111 cities across 29 countries, with 527,000 memberships as of 1 June 2019.certain
The $47 billion valuation was set by SoftBank's January 2019 round, not by the IPO: the S-1 was filed on 14 August 2019 and formally withdrawn on 30 September 2019, never having been declared effective, with no securities issued or sold under it.certain

Sources

The book

This entry is one of 111 in the register. The full story, and what it cost the people who lived it, is in Risky Business by Claudia Zeisberger, David Munro and Joanna Reijgersberg-Siew.

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