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WeWork Community-Adjusted IPO Valuation in Free Fall

For the second time in less than a week, the parent company of shared work space provider WeWork, The We Company, is reportedly considering slashing its IPO valuation. The IPO valuation could fall below $20B, which is well below half the $47B valuation it received in the private market in January.

That is if the company goes public at all. If it doesn't, they may have to ask their biggest shareholder, SoftBank Group Corp., to throw some more money in the furnace. If the IPO unravels, The We Company may miss out on nearly $10 billion "needed to fund its ambitious but money-losing global-growth plans."

The We Company's business model essentially revolves around locking in long-term leases, renting out on a short-term basis to tenants and pocketing the difference. In doing so, they've achieved a Silicon Valley valuation as a real estate company.

Since releasing its S-1 last month, doubts over the company have mounted. Investors appear to be most worried about two things - its business model and its CEO. Its valuation is astronomical - valued at 26 times 2018 revenues, compared to 12 and 4 for other large real estate companies Boston Properties and IWG, respectively. The filing also revealed revenues doubled while losses increased by 25%. You don't need a CFA charter to determine that isn't ideal.

Also concerning prospective investors is CEO Adam Neumann. He recently cashed out more than $700MM worth of his shares despite once saying "I should buy more WeWork stock if I want to make money.” He also owns buildings leased to WeWork, has received loans from the company, controls a majority of its voting power and has invested in his "passions."

With recent tech darlings Uber and Lyft stumbling since their IPOs, it appears investors are looking more closely at The We Company and wondering exactly what they're being sold.

Leftover Crumbs

  • A bipartisan group of state AGs will launch separate antitrust probes into Facebook and Alphabet's Google. In a sign of complacency, shares of the two companies crashed 1.8% and 0.5%, respectively, on Friday.

  • Bridgewater Associates, the world's largest hedge fund, saw its main strategy sink 5.5% in August and is now -5.8% for the year. Maybe a trip to Burning Man can turn things around.

  • That feeling when you didn't BTFD. Wall Street’s famous Charging Bull statue takes a beating from angry man.

  • Millennials and Gen Z freak out over nationwide White Claw shortage as demand soars for the popular booze.

  • Vinyl records are on track to outsell CDs for the first time since 1986. Time to dig up that box of records in the attic and sell them to some hipsters.