WeWork on Monday finally gave into the market pressures as the company’s parent organization announced to delay its controversial IPO launch. The Co-working giants’ parent company The We Company said that it is withdrawing the S1 filing for its IPO launch. The company did not disclose any timeline about when it plans to re-fill for the IPO again but it said that public listing will remain among its top priority in near future.
For WeWork the past few weeks have proved to be the most turbulent period in its history, with investors turning wary about company’s long term sustainability ahead of its much anticipated IPO. Investor’s panicky mood not only led to sharp drop in company’s valuation (from $47 bn to $15 bn) but also led to the ouster of CEO Adam Neumann.
Neumann will continue to act as non-executive chairman, with his power being heavily curtailed.
After retreating from IPO, the co-working giant is now expected to streamline its operation – just like Uber did ahead of its public listing. This may invariably mean that the SoftBank backed company may sell some of its subsidiary companies that were acquired during the past few years. The company may also drastically reduce its workforce count as well as cut down on its operational costs across several key markets.
If WeWork does go with these bold moves then the question to be asked is how much positive impact will this have on the company’s balance sheet. And will it be positive enough to convince that the investors to invest in the company’s IPO issue.
Investors are giving a Clear message through WeWork’s IPO fiasco…
The WeWork IPO fiasco has a clear and unambiguous message. And the message is that henceforth investors may not be ready to take leap of faith with startups that are not backed with sustainable revenue model. It is a moral lesson for startups that want to grow at any cost without scant respect for long term profitability.
Let’s take the example of WeWork itself, which reported operating loss of whopping $1.37 billion in the half year of the current financial year – with absolute no clear idea about long term road to profitability.
Industry experts argue that startup’s valuation bubble has finally busted with Uber and Lyft’s IPO turning out to be a big dud. And WeWork’s latest IPO fiasco has now only added to this perception. For many years several high-profile startups were often accused of commanding over-priced valuation, which was in stark contrast to their stressed balance sheets.