And then WeWork came along and did a bunch of crazy stuff, as WeWork is wont to do. And so here we are, once again trying to figure out what's going on inside Adam Neumann's head.
I guess we'll get to "Super Pumped" next week.
WeWork is reportedly thinking about not going public in 2019 after all, and if an IPO does occur, it could come at a highly reduced valuation. The co-working company is beseeching its biggest backer for more cash. And that's only the beginning of the drama—which is one of 10 things you need to know from the past week:
1. WeWork's wild rideEver since WeWork made its IPO prospectus public in mid-August, the company has been surrounded by a cacophony of criticism. Some of it has been about silly stuff, like WeWork's insistence that it wants to elevate the world's consciousness, or whatever. Some of it has been a lot more serious, like whether the company's business model will allow it to ever be anything more than a gigantic, well-decorated money pit.
Apparently, the heat isn't only coming from snarky media members like me. The Wall Street Journal published an eye-opening report on Thursday that, with potential investors skeptical about both its business model and its corporate governance, WeWork is now planning an IPO valuation of somewhere around $20 billion, a massive drop from the $47 billion valuation SoftBank lavished on the company in January. The WSJ also reported that CEO Adam Neumann traveled to Japan last week to meet with SoftBank leader Masayoshi Son, seeking additional capital and discussing a potential delay of WeWork's public debut into next year.
There's a lot to unpack here. WeWork's willingness to embrace a much lower market cap might be a sign that we should treat that $47 billion valuation with a degree of skepticism. After all, at the same time as that $5 billion investment in January, SoftBank supplied another $1 billion to buy out earlier investors and employees at a reported valuation of somewhere around $20 billion, in line with the $21.2 billion valuation WeWork attained in 2017. Perhaps that $47 billion figure was an unrealistic bit of symbolism on the part of SoftBank. It wouldn't be the first time.
Also of note is the nature of Neumann's talks with Son: The two discussed the possibility of SoftBank either making a multibillion-dollar investment in WeWork's IPO or a large private investment that, as the WSJ put it, "would allow We to delay its IPO until 2020." The key word there, I think, is "allow." That would seem to indicate that a public debut isn't just a chance for employees to cash out, and that WeWork actually needs the billions of dollars a listing would raise to continue funding its rapid growth. That's maybe not the best sign for a business that's already brought in some $12 billion.
It's unclear how Son and SoftBank feel about all this. The Japanese investor has already put $10.65 billion into WeWork, per the company's S-1 filing, which Bloomberg reported this week has allowed SoftBank to accumulate a 29% stake. Even when you're operating a $100 billion fund, that's a significant sum. Will SoftBank keep pouring in billions and hope WeWork figures things out, or is it approaching the end of its rope? Is there even an end to Son's rope?
There were two other WeWork developments this week that seemed in part like attempts to stem the tide of criticism that's overwhelmed the company in recent weeks. The company announced the addition of Frances Frei as a new board member, with the Harvard Business School professor and former Uber executive becoming the first woman to sit on its board. WeWork also revealed that Neumann has given back $5.9 million in stock that he received earlier this year for transferring the "we" trademark to the company, a widely condemned bit of shady self-dealing.
Considering the vitriol the deal inspired, Matt Levine of Bloomberg was accurate this week in calling it "a staggeringly dumb transaction." It seems certain that the negative economic impact of Neumann paying himself for the rights to the company's new name has been a whole lot more than $5.9 million.
Maybe self-awareness just isn't Neumann's strong point. Another piece of evidence for that case would be a statement the WeWork CEO made in a meeting with analysts this week when he criticized other unicorns for—wait for it—spending too much cash to fuel growth. "I look a little bit around at Uber and Lyft," he said, per Bloomberg. "I think there were growth issues. I think when you grow at any price there are consequences."
Someone get this man a mirror.
The string of gaffes and eye-rolling statements gets at an interesting question: Would postponing its IPO really help matters for WeWork? If investors aren't buying what the company is selling now, will another six or 12 months really change things? Sure, WeWork could keep acquiring other startups and continue its attempts at world-conquering diversification. But there's little sign of a change in the matter of a larger problem: Whether the valuation is $47 billion or $20 billion, most investors seem to think WeWork isn't worth it.