WeWork Cos. wants to go public – but first it wants to raise as much as $4 billion in debt.
The shared office space manager would like to generate confidence among investors, according to an insider.
The potential debt offering “underscores the extent to which the disappointing public market debuts for Uber Technologies Inc (UBER.N) and Lyft Inc (LYFT.O) prompted other loss-making start-ups with lofty valuations looking to go public to reassess their plans,” the news service Reuters reported. “Uber and Lyft went public earlier this year with high expectations but both faced criticism from investors about their steep losses and lack of a timetable to reach profitability.”
“Money-losing WeWork has faced questions about the sustainability of its business model, which is based on short-term revenue agreements and long-term loan liabilities,” Reuters reported.
“Yes, the company that boasts “eye-watering losses” — having lost $1.93 billion on $1.82 billion in sales last year — is yet another unicorn ready to make its public market debut despite never having turned a profit,” noted Fortune. “But the WSJ notes that it plans to offer billions of dollars in debt that would fund its growth until it can turn a profit. Huh.”
Meanwhile, the company continues to expand. It is currently planning its fourth Houston location since arriving here two years ago. According to the Houston Chronicle, “the New York company has leased 56,000 square feet in downtown’s 609 Main, a new 48-story office tower between Texas Avenue and Capitol. The 609 Main building, developed and managed by Hines, is just a block away from WeWork’s first Houston location in the Jones building at 708 Main St. where it operates 86,000 square feet. Between both locations, WeWork will have more than 2,400 desks. WeWork often operates multiple locations near each other, the company said, citing examples in Dallas, Plano, Austin and other cities around the country.”
The company, wrote seekingalpha.com, “has telegraphed that it will be going public in months. Now in preparation for their IPO debut, it is going out and selling at least $4 billion in bonds. The logic is unique, going to the bond market to load up on debt to help it appeal to retail investors. Let that hang in the air for a moment. Sounds dumb, right? WeWork is spending money faster, you know I can’t think of a metaphor that would appropriately convey how dumb this business model is and how irresponsibly this company is spending someone’s pension money. I hope it’s only sovereign wealth funds and SoftBank (OTCPK:SFTBY) (OTCPK:SFTBF) money that is being destroyed.”
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