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Report: WeWork Could Run Out of Money As Soon as Next Month
By
Eric Lutz
October 11, 2019
WeWork’s downfall didn’t end with the ouster of co-founder Adam Neumann or the indefinite stall of its I.P.O. On the contrary, the hits have kept right on coming, both for Neumann and for the embattled company. According to Bloomberg, the start-up will run out of money next month without new financing—a stunning prospect for what was, less than a year ago, the highest-valued anticipated public offering in the country. (A WeWork representative didn’t immediately respond to Bloomberg’s request for comment.) WeWork will also shutter its New York City private school at the conclusion of the school year—a reflection of its tenuous financial position. And Neumann, who was forced out of the company last month, has now lost his billionaire status, just over six months after his worth was estimated at $4.1 billion.
Not so long ago, WeWork was set to go public this fall. But the company pulled its I.P.O. after heavy scrutiny of its management and business model caused its valuation to wobble, then tank. In January, it was tagged at $47 billion. Several months of investor skepticism later, that valuation had sunk to below $15 billion. The company tried to tamp down concerns about its corporate governance: Neumann returned the $6 million he had squeezed from his own company to use the “We” trademark, for instance. But that wasn’t enough to put investors at ease. As the company’s tailspin continued, Neumann became evermore fixated on his own fantasies. “It’s an all-around shitshow,” one executive told my colleague Gabriel Sherman.
With the I.P.O. all but dead, Neumann was forced to resign. The company’s new co-CEOs lost no time in unloading his cronies, and attempting to do the same to his pricey private jet. WeWork put its anticipated I.P.O. out of its misery shortly thereafter. “We have decided to postpone our IPO to focus on our core business,” co-CEOs Artie Minson and Sebastian Gunningham said in a statement at the end of September.
As Bloomberg noted Friday, the company had been banking on that IPO to meet its financial needs. With that plan out the window, Minson and Gunningham need a cash infusion—and fast. They might get it in the coming weeks, with SoftBank and J.P. Morgan Chase in talks to prop up the struggling company. That, along with cost-cutting measures by Minson and Gunningham, could get the company back on track, though it will still be viewed with skepticism, and may never regain its sky-high valuation. It’s difficult to say the same for its co-founder, whose estimated wealth is now around $600 million. According to Forbes, which booted him from the billionaires’ club Thursday, it’s unlikely he’ll see his name on the world’s richest people list again after the debacle. “No one will believe again that having an app for booking a conference makes you a tech company,” NYU marketing professor and WeWork critic Scott Galloway told Forbes. “If the new co-CEOs come back with a harsh but feasible plan, they announce new capital from SoftBank, this could be a company where it’s, I would call it, $5-to-$10 billion—if they execute perfectly.” Otherwise, Galloway said, “this could get very ugly very fast for a lot of people.”
By
Eric Lutz
October 11, 2019
WeWork’s downfall didn’t end with the ouster of co-founder Adam Neumann or the indefinite stall of its I.P.O. On the contrary, the hits have kept right on coming, both for Neumann and for the embattled company. According to Bloomberg, the start-up will run out of money next month without new financing—a stunning prospect for what was, less than a year ago, the highest-valued anticipated public offering in the country. (A WeWork representative didn’t immediately respond to Bloomberg’s request for comment.) WeWork will also shutter its New York City private school at the conclusion of the school year—a reflection of its tenuous financial position. And Neumann, who was forced out of the company last month, has now lost his billionaire status, just over six months after his worth was estimated at $4.1 billion.
Not so long ago, WeWork was set to go public this fall. But the company pulled its I.P.O. after heavy scrutiny of its management and business model caused its valuation to wobble, then tank. In January, it was tagged at $47 billion. Several months of investor skepticism later, that valuation had sunk to below $15 billion. The company tried to tamp down concerns about its corporate governance: Neumann returned the $6 million he had squeezed from his own company to use the “We” trademark, for instance. But that wasn’t enough to put investors at ease. As the company’s tailspin continued, Neumann became evermore fixated on his own fantasies. “It’s an all-around shitshow,” one executive told my colleague Gabriel Sherman.
With the I.P.O. all but dead, Neumann was forced to resign. The company’s new co-CEOs lost no time in unloading his cronies, and attempting to do the same to his pricey private jet. WeWork put its anticipated I.P.O. out of its misery shortly thereafter. “We have decided to postpone our IPO to focus on our core business,” co-CEOs Artie Minson and Sebastian Gunningham said in a statement at the end of September.
As Bloomberg noted Friday, the company had been banking on that IPO to meet its financial needs. With that plan out the window, Minson and Gunningham need a cash infusion—and fast. They might get it in the coming weeks, with SoftBank and J.P. Morgan Chase in talks to prop up the struggling company. That, along with cost-cutting measures by Minson and Gunningham, could get the company back on track, though it will still be viewed with skepticism, and may never regain its sky-high valuation. It’s difficult to say the same for its co-founder, whose estimated wealth is now around $600 million. According to Forbes, which booted him from the billionaires’ club Thursday, it’s unlikely he’ll see his name on the world’s richest people list again after the debacle. “No one will believe again that having an app for booking a conference makes you a tech company,” NYU marketing professor and WeWork critic Scott Galloway told Forbes. “If the new co-CEOs come back with a harsh but feasible plan, they announce new capital from SoftBank, this could be a company where it’s, I would call it, $5-to-$10 billion—if they execute perfectly.” Otherwise, Galloway said, “this could get very ugly very fast for a lot of people.”
