WeWork Takes Key Step Toward I.P.O., Citing Heady Growth and Huge Losses

WeWork, a real estate firm that leases shared office space, on Wednesday officially set in motion the process of becoming a publicly traded company by filing a financial prospectus with regulators.

The offering by the company, which is led by a brash Israeli entrepreneur and backed by money from Saudi Arabia, will be a major test of investors’ appetite for fast-growing but unprofitable start-ups after similar moves this year by the ride-hailing rivals Uber and Lyft proved to be disappointments.

WeWork, which is valued at nearly $50 billion as a private company, faces sharp questions about its business model. It lost more than $1.6 billion last year on just $1.8 billion in revenue, according to the prospectus. By comparison, Uber lost $1.8 billion last year on revenue of $11.3 billion. WeWork’s losses accelerated in the first half of 2019, although its revenue more than doubled, the filing shows.

The company’s core business is simple: It takes out long-term leases on commercial real estate, spiffs up the spaces with amenities like fashionable furniture and free beer, and then rents out individual offices and larger suites to other companies.

WeWork said in its filing that it has more than 604,000 workstations, or desks, around the world, and more than 527,000 “members,” the company’s term for people with access to those desks. Both figures were roughly double what they were a year ago. WeWork also said that its sales were growing quickly, and that it expected them to total $3.3 billion this year.

But the company’s capital-intensive business and breakneck growth have made profitability elusive. WeWork lost almost $900 million in 2017, and more than $400 million in 2016, the filing shows.

WeWork was founded by Adam Neumann and Miguel McKelvey in New York in 2010. The pair bet that co-working would be big, and they began taking out pricey leases on large commercial spaces in New York and other major cities, then renting out portions to start-ups. In time, WeWork, which is officially known as the We Company, expanded to offer larger spaces to corporate tenants such as Expedia, JPMorgan and Siemens.

Mr. Neumann, an Israeli who lived on a kibbutz, and Mr. McKelvey, who lived on a commune in Oregon, quickly distinguished WeWork as an unconventional company. Mr. Neumann spoke passionately about its role in creating a better world, while Mr. McKelvey, a vegetarian, led an effort to make WeWork a meat-free company.

That idealism was reflected in the financial prospectus. “Nine years ago, we had a mission to create a world where people work to make a life, not just a living,” the company wrote. “We believed that if we created a community that helped people live life with purpose, we could have a meaningful impact on the world.”

The company’s ambitions have since expanded beyond co-working spaces into housing and education.

But in recent years, its rhetoric has collided with the realities of running a complex business. It has been criticized for being largely backed by the SoftBank Vision Fund, which counts the Public Investment Fund of Saudi Arabia as a major source of capital. And Mr. Neumann, the animating force behind the company, has come under scrutiny for several potential conflicts of interest. His wife, Rebekah, has started an elementary school as part of the company. Mr. Neumann has used the company to invest in inland surfing parks. And The Wall Street Journal has revealed instances in which Mr. Neumann had WeWork take out leases on buildings he owned, and has sold off much of his stake in the company before the I.P.O.

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