You know the old saying – if at first, you lose forty billion dollars, try, try again.

Two years after its epic IPO failure, WeWork is again planning to go public – this time, via SPAC, BowX Acquisition Corp.BOWX

at a valuation of $9b.

Office space, beer and community disguised as innovation

WeWork was once one of the most promising startups of the decade. The company’s coworking business was simple – sign a long-term lease, renovate the workspace (fill it with beer and call it “innovation”) and rent it out to tenants, at a premium price of course..

With over 425 global locations and having raised over $12b in funding, WeWork was ready to go public. In Aug. 2019, WeWork released their highly anticipated S1 filing and investors got a first look at its business. But investors didn’t like what they saw…

Shady business practices, outrageous expenses ($42k spent on building a kindergarten) and massive losses – the filing was filled with red flags. Facing investor backlash, WeWork’s IPO was canceled and its CEO, Adam Neumann, was replaced.

In early 2020, WeWork’s valuation fell to $2.9b – less than a tenth of the $47b valuation it was trying to go public at. WeWork became a spectacular failure.

A very tough sell

Barely a year later, WeWork is having another try at going public. With a new CEO in place, WeWork spent the past year transforming the business with a focus on cutting costs. 

But it isn’t easy when COVID reduces high-rise office demand by 25%. Here’s how WeWork did in 2020:

• $3.21b in sales – down 1% from the previous year
• $3.22b in losses – down from $3.5b in the previous year
• $49m in capital expenditures – down from $2.2b in the previous year

WeWork projects a fast rebound to 90% occupancy – an optimistic number given its pre-pandemic occupancy rate of 72%, which dropped to 47% at the end of COVID.

For investors… Fool me once…

WeWork suffered a major blow to its reputation when its 2019 IPO imploded. To avoid the same fate a second time around, they’ll have to

• Stop the bleeding – i.e. cut its losses, significantly
• Convince workers to come back in the office and prove it can become profitable

As remote work becomes more common, companies could be more likely to adopt flexible workspaces/leases. This could benefit WeWork and its biggest competitor Regus (LON: IWG).

Food for thought: WeWork is going public at a valuation of $9b… While the company is losing nearly $3b every year – a third of what it’s worth 🤯