WeWork, the massive co-working startup backed by SoftBank and its $100 billion Vision Fund, plans to go public with a valuation of $47 billion, equal to its last private funding round.
Valuation Unmoored from Reality Private investors have essentially bid up WeWork’s valuation through very narrow private funding rounds.
WeWork CFO Artie Minson has tried to characterize the company’s wild cash burn as investment, claiming: “There is a real difference between losing money and investing money.” Yet, the staggering losses in recent years have forced WeWork repeatedly to tap investors for cash.
According to estimates from Sanford C. Bernstein & Co., WeWork will burn through $9 billion in cash through 2020, with cash needs through 2026 exceeding $19.7 billion.
“Aside from the robust spending, WeWork has other qualities that analysts and real-estate investors find concerning. The company has only existed during a bull market, and its core business model involves signing long-term leases and then subleasing them shorter term-a risk in a recession when office rents tend to fall sharply. WeWork says that so far, it has performed well in regions with recessionary economies.”
No One Believes the Valuation It is a rare thing indeed for a startup to question its own valuation, yet WeWork has done just that on occasion.
Investor’s Eye View Fundamentally, WeWork’s valuation has no basis in the realities of the office rental business.