Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

<div class="content-highlight"><a href="https://www.smartkarma.com/entities/the-we-company-wework" target="_blank" data-smartkarma-citation="entities:28061:1" rel="noopener">The We Company or (WeWork) (WE US)</a> is getting ready for an IPO in the coming weeks in a risky market environment. There is such a high amount of skepticism on this company so that to pull off this IPO at the most recent private market valuation ($47 billion) would be like a 90-year granny trying to catch a live, lightning-quick chicken with her bare hands within 60 seconds. (In other words, it can be done, but the probability is very low). </div>The We Company has been operational for nine years and during this period, the company has yet to experience any major downturn in the global commercial real estate sector. We admit that the company has global market leadership in the business of providing flexible, commercial real estate rentals, capitalizing on the price differentials between the shorter and longer-term commercial real estate leases. Nonetheless, the company is certainly not immune from the next major downturn in the commercial real estate sector. The company is in the midst of trying to raise $9 billion to $10 billion in both equity and debt funding. Therefore, in addition to the company's existing cash of $2.5 billion, if they make a perfect pitch and are able to raise these huge sums of money in the next few weeks, it is likely that the company will not need to raise additional funds for the next two to three years. Nonetheless, because of the significant roadblocks ahead, it may be very difficult for the company to raise these huge amounts of capital and it may need to materially downsize the amount of capital it plans to raise in the next few weeks which means that the company will need to drastically reduce the IPO valuation level (much lower than $47 billion) if it is serious about raising equity capital from institutional investors.

The We Company or (WeWork) (WE US) is getting ready for an IPO in the coming weeks in a risky market environment. There is such a high amount of skepticism on this company so that to pull off this IPO at the most recent private market valuation ($47 billion) would be like a 90-year granny trying to catch a live, lightning-quick chicken with her bare hands within 60 seconds. (In other words, it can be done, but the probability is very low). The We Company has been operational for nine years and during this period, the company has yet to experience any major downturn in the global commercial real estate sector. We admit that the company has global market leadership in the business of providing flexible, commercial real estate rentals, capitalizing on the price differentials between the shorter and longer-term commercial real estate leases. Nonetheless, the company is certainly not immune from the next major downturn in the commercial real estate sector. The company is in the midst of trying to raise $9 billion to $10 billion in both equity and debt funding. Therefore, in addition to the company's existing cash of $2.5 billion, if they make a perfect pitch and are able to raise these huge sums of money in the next few weeks, it is likely that the company will not need to raise additional funds for the next two to three years. Nonetheless, because of the significant roadblocks ahead, it may be very difficult for the company to raise these huge amounts of capital and it may need to materially downsize the amount of capital it plans to raise in the next few weeks which means that the company will need to drastically reduce the IPO valuation level (much lower than $47 billion) if it is serious about raising equity capital from institutional investors.

IPO and L/S equity, 2015 Starmine top stock picker, Global Equity Research Ltd

Rickin Thakrar

IPO and L/S equity, 2015 Starmine top stock picker

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

<a href="https://www.smartkarma.com/entities/the-we-company-wework" target="_blank" data-smartkarma-citation="entities:28061:1" rel="noopener">The We Company (WeWork) (WEWORK US)</a> has filed its <a href="https://www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm#fin781982_1" target="_blank" rel="noopener">IPO prospectus </a>in order to raise an estimated 3.5bn USD (Source: local press) We note a few points below. Intro to WeWork IPO4bn in near term contractual liabilitiesCash flows and earnings stream look insufficientGER view

The We Company (WeWork) (WEWORK US) has filed its IPO prospectus in order to raise an estimated 3.5bn USD (Source: local press) We note a few points below. Intro to WeWork IPO4bn in near term contractual liabilitiesCash flows and earnings stream look insufficientGER view

Telco/Internet specialist

Kirk Boodry

Redex Research

WeWork continues to progress towards an IPO that could come as early as the end of this year. It had filed a confidential prospectus with the SEC already,  is reportedly in talks to buy in its India affiliate for $1.9bn,  and is also talking to banks to raise $3-4bn in debt funding to reassure potential equity investors it has sufficient resources to reach break-even.Whilst eye-popping operating losses have generated most of the headlines, we see a path to profitability over the mid-term. The main question is whether anticipated growth supports a valuation of $20-$47bn based on previous funding rounds. We think that even the bottom of that range is too high based on our own preliminary forecasts, which generate an equity value of $12bn whilst revenue multiples suggest a value of $9-22bn.In this report we talk about the sector opportunity, provide detail on our forecasts and valuation, and have included a list of suggested topics/questions for management. The company is reportedly considering an analyst day later this month in NYC, which could go some way in clarifying outstanding issues.

WeWork continues to progress towards an IPO that could come as early as the end of this year. It had filed a confidential prospectus with the SEC already,  is reportedly in talks to buy in its India affiliate for $1.9bn,  and is also talking to banks to raise $3-4bn in debt funding to reassure potential equity investors it has sufficient resources to reach break-even.Whilst eye-popping operating losses have generated most of the headlines, we see a path to profitability over the mid-term. The main question is whether anticipated growth supports a valuation of $20-$47bn based on previous funding rounds. We think that even the bottom of that range is too high based on our own preliminary forecasts, which generate an equity value of $12bn whilst revenue multiples suggest a value of $9-22bn.In this report we talk about the sector opportunity, provide detail on our forecasts and valuation, and have included a list of suggested topics/questions for management. The company is reportedly considering an analyst day later this month in NYC, which could go some way in clarifying outstanding issues.

WeWork: Even $20bn Is a Stretch Valuation - A Deep Dive and Closer Look at Investment Issues

Switzerland

IWG PLC operates as a holding company. The company owns and provides office space.

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IWG PLC (IWG LN)

The We Company (WeWork) IPO Preview

The We Company or (WeWork) (WE US) is getting ready for an IPO in the coming weeks in a risky market environment. There is such a high amount of...

Douglas Kim

WeWork IPO Preview: WeNeedCash?

The We Company (WeWork) (WEWORK US) has filed its IPO prospectus in order to raise an estimated 3.5bn USD (Source: local press) We note a few...

Rickin Thakrar

WeWork: Even $20bn Is a Stretch Valuation - A Deep Dive and Closer Look at Investment Issues

WeWork continues to progress towards an IPO that could come as early as the end of this year. It had filed a confidential prospectus with the SEC...

Kirk Boodry

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