WeWork planning to drop valuation to below US$20 bln: news reports

The first eight months of 2019 has seen volatility in markets due to the trade tensions between the United States (US) and China, which also led to slower global economic growth. The impact of an uncertain economic outlook has plagued the valuations of tech companies who have reached maturity looking to debut: office sharing firm WeWork is now considering a valuation for its initial public offering (IPO) to be below US$20 billion, which is two-third less than the robust US$65 billion projection bankers had months ago.

WeWork’s investors are pushing for the firm to postpone the IPO while the firm’s parent company We Co is planning to hold meetings this week to make changes to the listing in order to make it palatable enough to investors for a share sale, news service Dow Jones reported.

Earlier this year, Goldman Sachs bankers were saying that the office-sharing firm could soon become a US$65 billion company. But questions circulating around the firm’s business prospects quelled the hype on listing the hipster office sharing company.

According to news reports, WeWork is also in talks with its largest investor SoftBank Group to get more financing so that they can delay the listing.

In its nine years as a start-up, the New York firm has yet to turn a profit. The firm which is in its late stage venture, has more than 10,000 employees globally. It chalked up US$690 million in losses in just the first six months of 2019, bringing its total losses to almost US$3 billion in the past three years, filing from WeWork’s preliminary prospectus showed.

The year has seen exuberant interest in new listings of unicorn tech companies – privately held start-ups valued at over US$1 billion. Ride-hailing firms Lyft and Uber went public earlier in the year, but uncertainty over the firms and their ability to turn profitable caused a negative reaction to their share prices.

In June, workplace instant messaging app Slack debuted on Wall Street in a direct listing at US$26 per share and its shares have seen little lift over the past few months, with its latest price pegged at US$27.38. Meanwhile, Chinese retailer Miniso is said to be planning an IPO to raise around US$1 billion, in a share sale that could take place in Hong Kong or the US.

China’s ecommerce giant Alibaba is also in talks to file for as much as US$15 billion in the new listing. The ecommerce firm already has a listing on the NYSE, where it raised US$25 billion in 2014, chalking up the largest IPO listing in history.

But the ongoing civil protests in Hong Kong have caused the Alibaba listing to be delayed, sources told Reuters.