Behind the rapid expansion of burning money and the devaluation of valuations, WeWork also has a star entrepreneur, a corporate culture of “not the same” and a stubborn investor, Sun Zhengyi.

Editor’s note: This article is from WeChat public account “Geek Park” (ID:geekpark), author Moonshot.

On the evening of August 14, WeWork officially submitted an initial public offering (IPO) prospectus to the US Securities and Exchange Commission (SEC). WeWork has not disclosed the listed exchanges, sources said that the listing time is tentatively scheduled for September this year. The underwriters of the IPO include JP Morgan Chase, Goldman Sachs, Bank of America Securities Barclays, Citigroup, Credit Suisse, HSBC, UBS and Wells Fargo.

Before, on August 5th, “late LatePost” reported that WeWork’s real valuation fell to $23.1 billion from the $47 billion disclosed by the media. According to WeWork prospectus data, WeWork’s revenue in the past three years has risen from US$436 million (2016) to US$1.821 billion (2018), and revenue growth nearly doubled. As of June 30, 2019, WeWork In the first half of 2019, revenues reached $1.535 billion.

The end of the scale business, WeWork evaluates the IPO of the waistline

The We Company | WeWork Prospectus

On the other hand, the growing losses are also one of the reasons why WeWork’s real valuation is not as good as expected. WeWork’s loss increased from $429 million (2016) to $1,927 million (2018), and it’s not hard to figure out that the company is losing money faster than revenue.

The end of the scale business, WeWork evaluates the IPO of the waistline

“Remodeling” Office Space WeWork | WeWork official website

WeWork is a representative company in the shared office field for the past ten years. Based on the offline real estate business and relying on online Internet services, like Uber and Airbnb, which are also listed this year, WeWork also represents a kind of “subversion”. .

Space as a Service

Whether it’s a prospectus or a concept that has always been passed on to the public, WeWork claims to pioneer and lead the “space-as-a-service” model. And “space as a service” explains the main business of We, the way WeWork works: provide space.

WeWork first purchases or leases real estate in major cities around the world, then transforms the real estate into a more modern office space, then splits the entire office space into one station, and finally carries out a series of service businesses around the station. Rent from the most basic single station to the office space customization. The entire business model is similar to Airbnb, but WeWork is the only “landlord”.

According to the WeWork prospectus, WeWork has opened 528 office spaces in 111 cities in 29 countries, with a total of 527,000 WeWork members and 38% of the global Fortune 500 companies. Behind the 528 WeWork spaces is a $14 billion long-term lease contract.

The end of the scale business, WeWork evaluates the IPO of the waistline

WeWork’s global expansion speed and store list | WeWork Prospectus

Signing a long-term lease at a lower price. If you want to make a profit by doing a “second homeowner,” you need WeWork to ensure that the demand for high-priced short-term leases continues. Before the official opening, WeWork needs to find the right real estate, sign a long-term lease, and then redesign, renovate, upgrade and even customize the real estate. These high-end investments are facing the cost of recycling after the opening. Uncertainty.

In recent years, behind the growth of revenue is the continued expansion of WeWork, which is the main reason for their continued losses. WeWork also mentioned this trend in the prospectus. WeWork said that when a new space is opened for more than two years, the space enters the “as mature” and the occupancy rate and revenue will stabilize.

As of 2019On June 1, only 30% of the 528 WeWork spaces entered maturity, but the remaining 70% began to generate stable revenue over time. In other words, WeWork believes that the previous “burning money” is inevitable, and the current book loss problem will take time.

Fuzzy positioning

WeWork plans to raise $3 billion to $4 billion after the IPO. According to the prospectus, WeWork has received $6 billion in credit lines from major financial institutions. As of June 30, WeWork has 3 billion on the books. The dollar, which means that WeWork will have up to $13 billion on its books for distribution. But having a line of credit does not mean that WeWork is recognized by investment institutions.

Because of excessive investment, long-term negative cash flow, long-term lease contract (WeWork usually signs a 15-year lease), and even Fitch, the most optimistic bond rating company for WeWork’s future profitability, will also WeWork’s bond rating was downgraded to three levels and fell to B-. In the securities rating, B- means “highly speculative.” Bond companies are more concerned about their ability to repay debt than the company’s future prospects.

The end of the scale business, WeWork evaluates the IPO of the waistline

WeWork explains that “burning money expansion” will turn the company from profit to loss in the future | WeWork Prospectus

WeWork founder and CEO Adam Neumann’s vision and actual results have also eroded the mistrust between investors and businesses.

For positioning, at the beginning of the company, Adam Neumann thought that WeWork was not a technology company, nor a real estate company, but a “community company.” In addition to WeWork’s main business, We’s also extends WeLive, which provides studios in developed financial districts, and WeGrow, which provides educational institutions.

According to Intelligencer’s report on Adam Neumann and WeWork, in Neumann’s eyes, WeWork aims to become “the world’s first physical social network.” Just like social networks use algorithms to derive people who are interested in users, WeWork uses technology to analyze the user’s use of space to planWeWork space. For example, the frequency of team brainstorming and the number of people who like to work alone by the window.

“Revolving door culture”

WeWork sells not only the land and space, but also the culture they call “WeOS.” WeWork Chief Cultural Officer McKelvey has implemented the slogan “Operationalize Love” within the company. The company’s slogan is “Make a Life, Not Just a Living”.

However, employees at all levels of WeWork in the media interview revealed that they work 60-70 hours a week, work 12-14 hours per working day, and are forced by the company to participate in non-work hours. Team building activities, and can not be absent multiple times. According to some WeWork employees, the experience of working at WeWork is “to enter the company, to be excited about the mission, to leave because of exhaustion.”

Employees are like a station in the WeWork space, and will be filled soon after the vacancy. A former WeWork executive commented that “the irony is that the company that sells a certain culture lacks culture itself. If the company has a corporate culture, it is a revolving door (frequent flow of people) culture.

In addition, WeWork executive Joel Steinhaus said in an interview that when he works at Citibank, each person can be assigned to an office of 18 – 23 square meters, while WeWork has a single working space of less than 5 square meters.

There is a huge public space. Many WeWork employees mentioned that the company’s stairs and corridors are narrow, which makes it necessary for employees to communicate. WeWork says public spaces help employees build intimacy with each other. . WeWork has changed the working form from the space, but whether this change can be passed depends on the market test and the user experience.

In addition to the company’s own ambiguity, another conflict stems from the investment behavior of founder Adam Neumann.

A month before WeWork announced its prospectus, according to TechCrunch, Adam Neumann had cashed in advance of $700 million and signed a lease contract with all four properties under Neumann’s name. In the past three years, WeWork has paid a total of $16.7 million on these leases. Neumann also set a record for private company executives to cash out. In response, WeWork responded in a prospectus, saying that this is Neumann’s initiative to buy real estate leases to its own company in order to prove that its business model is feasible.

The end of the scale business, WeWork evaluates the IPO of the waistline

Adam Neumann’s image of “Star Entrepreneur” | Bloomberg Business Weekly

In addition, according to the prospectus, Adam Neumann currently has a maximum credit line of US$500 million from Swiss Bank, Stamford Branch, JPMorgan Chase Bank, NA and Credit Suisse New York Branch, as of July 31, 2019. The 380 million dollar principal is outstanding. The loan is secured by a partial share of The We Company.

His wife Rebekah Paltrow Neumann is not only the CEO of WeGrow, but also one of the successors appointed by We. Adam’s immediate family is also the head of various services at We. This strong “family business” color may also be questioned by investors, especially the Softbank Vision Fund, which focuses on “investment in the technology sector.”

Investors no longer pay for orders

We share the largest shareholder of Adam Neumann, followed by WeWork’s Bole: Softbank, or Sun Justice.

Sun Zhengyi once said: “WeWork has overturned the trillion-dollar industry by providing a complete solution for the space provided by the technology platform. WeWork has experienced unprecedented growth, and we believe that using Adam’s vision and growth Capital, the company will be able to actively pursue future huge market opportunities.” He encouraged employees of Softbank and Softbank’s investment companies to work in WeWork space, and even once moved to move Softbank headquarters to WeWork’s shared office space. idea.

The end of the scale business, WeWork evaluates the IPO of the waistline

Sun Justice and Adam Neumann | Business Standard

In 2017, under the leadership of Sun Zhengyi, Softbank Vision Fund acquired nearly one-fifth of WeWork’s shares for US$4.4 billion at a valuation of US$20 billion.The Softbank Vision Fund became a major investor in the company.

In 2018, Softbank invested WeWork 4 billion in the form of a share option. Originally, Sun Yiyi wanted to invest US$20 billion to subscribe for WeWork’s equity, but was met by the vision fund’s main fund supporter Mubadala Investment Company and Saudi Arabia’s public investment. The opposition of the fund (PIF). According to people familiar with the matter, both PIF and Mubadala have large investments in the real estate industry, and they hope that Softbank executives will use the Vision Fund to focus on investments in the technology sector.

At the beginning of this year, Softbank and WeWork came to an end with a $20 billion investment negotiation, but Sun Zheng said in a final call to Adam Neumann that Softbank could only inject $2 billion. This investment, like the 2018 capital injection, does not pass the Softbank Vision Fund, but the investment of Softbank itself.

Since the establishment of the Softbank Vision Fund, several large-scale investment companies have been listed this year. Uber and Slack have come to WeWork to fall into the actual valuation and the valuation is falling. The company is difficult to make profits, and financial institutions are not optimistic about the difficulties. The foresight of the car and the current economic situation make investors reluctant to pay for the “change the world” feelings, only the data will tell the truth.

Unlike Uber and Slack, WeWork is doing business on a large scale, stopping expansion to keep existing stores in revenue, or continuing to maintain an expansionary state of being unable to make ends meet. The actual share price of “waist” may be exactly what investors have given to WeWork. Statement.

WeWork’s attempt to scale ahead of the market seems to have failed. The corporate image that the company has been trying to package for a long time has not been implemented internally. It is difficult for the outside world to convince investors. How to emphasize the concept of “space as a service” and “WeOS”, WeWork is also difficult to get rid of investors’ recognition of its “real estate company”. know.

The founder’s “high-profile” and private investment behavior in the media is also questionable. Although WeWork stated in the prospectus that “as long as we stop expanding, we can continue to make profits immediately.” It is still unknown whether the company that has developed at the rocket speed since its financing has the ability to stop the expansion.