WeWork's parent says the IPO is still active despite the setbacks

(Reuters) – WeWork 's owner, We Company, announced on Monday its intention to finalize its IPO by the end of the year, after getting away from more preparations. early in the day to proceed to its stock market debut this month.

The US start-up specializing in office sharing was preparing to launch an investor road show for its IPO this week before making its decision Monday at the last minute to cease operations. .

The company was put under pressure to proceed with the IPO in order to guarantee the financing of its activities.

In anticipation of the launch of its IPO, We Company has been confronted with concerns about its corporate governance standards, as well as the sustainability of its business model, which is based on a combination of long-term liabilities and income. short term. how could such a model withstand an economic slowdown?

Reuters announced last week that We Company could claim a valuation of between $ 10 billion and $ 12 billion during its IPO, a significant reduction from the $ 47 billion valuation it had done in January.

"We look forward to our next IPO, which is expected to be completed by the end of the year. We would like to thank all our employees, members and partners for their continued commitment, "said the company in a brief statement.

If we had pursued the IPO with such a low valuation, this would have been a major turning point in growth over the past decade in the venture capital industry, which has led to the rise of startups such as Uber Technologies Inc. (UBER.N), Snap Inc (SNAP.N) and Airbnb Inc.

That would have meant that We Company would be valued at less than $ 12.8 billion of equity that it has collected since its founding in 2010, according to the Crunchbase data provider. And that would have been a blow for his biggest support, the Japanese group SoftBank Group Corp. (9984.T), at a time when he is trying to raise $ 108 billion from investors for his second Vision fund.

SoftBank discussed supporting the IPO by taking shares ranging from $ 750 million to $ 1 billion, the sources said. However, We Company decided Monday that even with the support of SoftBank, the IPO would have raised just over $ 2 billion, a target of less than $ 3 billion.

This goal is tied to a $ 6 billion credit line that We Company obtained from banks last month, which calls for an IPO by the end of the year and allows for raise at least $ 3 billion, said one of the sources.

If the New York-based company does not achieve this goal by the end of the year, it would need alternative financing.

The Wall Street Journal first noted the potential delay in the IPO.

Sources who spoke to Reuters asked for anonymity because the case is confidential.

The last time SoftBank invested in We Company was in January at a valuation of $ 47 billion, injecting $ 2 billion in cash. He had pushed the company to delay his IPO.

JPMorgan Chase & Co (JPM.N) and Goldman Sachs Group Inc (GS.N) had been responsible for leading the IPO of We Company as underwriters.

GOVERNANCE CHANGES

The company's decision to delay its IPO indicates that she was not convinced that the changes to corporate governance announced on Friday, slightly loosening control of chairman and co-founder Adam Neumann on the company, were enough to seduce investors worried about the lack of profitability.

Our company stated that the changes were made "in response to market feedback". Neumann's higher voting shares will increase from 20 to 10 votes per share, but will retain majority control of the company.

Neumann will also remit to the company the profits it would receive in real estate transactions in which it has entered into contracts with We Company. It will also limit its ability to sell shares in the second and third years after the IPO to a maximum of 10% of its shares.

No members of Neumann's family will be on the company's board of directors and no successor will be chosen by the board, canceling a plan to help his wife and co-founder, Rebekah Neumann, choose his successor .

The WeWork brand is closely linked to Neumann, a 40-year-old, free-spirited Israeli entrepreneur who said We Company's mission was "to raise the consciousness of the world".

Rebekah Neumann is the brand manager.

(Fix a typo in the first paragraph.)