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- Scott Galloway, a professor at New York University known for his fierce science, on Friday called WeWork's initial public offering "Botox on a lame unicorn" and asked the Securities and Exchange Commission to investigate.
- WeWork confirmed last Friday that it was still preparing to go public under its new name, The We Company, but that it had slashed control of the company by general manager Adam Neumann in response to the nervousness investors, among other governance changes.
- Galloway said the governance changes had brought the company from "stage 4 to cancer" to "stage 3.8" and speculated on why WeWork was pursuing an IPO that could value the company at $ 10 billion, less than the amount she collected in private.
- Galloway slammed the eventual float by saying, "The price will be artificial, sitting on a throne of lies, and eventual debacle for the release by Softbank and others, who bought shares only to eventually be able to sell more shares, could send a thrill through the unicorn class and the wider market ".
- Read all the Business Insider WeWork coverage here.
Scott Galloway, an author and expert at New York University, harshly criticized WeWork and asked why the company was still considering making public an evaluation that would have been massively reduced and questionable fundamentals.
Galloway replied on Twitter changes in governance at WeWork, which is about to float on the Nasdaq as The We Company.
In an updated document filed with the Securities and Exchange Commission on Friday, WeWork said it would limit the voting rights of its CEO, Adam Neumann, by increasing his voting shares to 10 votes each instead of 20.
Other changes in governance include the appointment of a woman, Frances Frei, to WeWork 's fully male board of directors, the board' s ability to dismiss the CEO, and the promise that the company will take on board. no member of Neumann's family can sit on the council.
Galloway wrote on Twitter: "So, the governance of @wwork is no longer a stage 4 cancer, but a stage 3.9 Wait, I forgot, they now have a woman (panting!) On the board. and let's call it progressive stage 3. And then, no child labor? "
Read more: A New York University professor calls WeWork "WeWTF," says any Wall Street analyst who estimates that a value of more than $ 10 billion is "lying, stupid, or both."
The professor also speculated on reports that WeWork could be made public with a valuation significantly lower than expected, between 10 and 12 billion dollars. The company had already been valued at $ 47 billion, and a SoftBank executive, his main investor, Rajeev Misra, predicted last year a $ 100 billion worth.
An initial public offering for this valuation would mean that WeWork would become public less expensive than it mobilized in private capital; WeWork has collected $ 12.8 billion, according to Crunchbase.
Galloway speculated on why insiders would not allow WeWork to become public, despite tanking.
He suggested that one of the major IPO banks, JPMorgan, would suffer damage to its reputation if the IPO did not come to fruition and also wished to have its loans repaid to WeWork and Neumann. JPMorgan facilitated Neumann's borrowings against its shares and, according to Bloomberg, provided $ 40 million of mortgage loans for its luxury homes.
It is not clear that JPMorgan would be repaid as soon as possible, even with a $ 10 billion IPO, as the preferred share holders would be paid first.
"JPM is in a corner, having loaned / bought to Neumans hundreds of millions of dollars backed by Adam's common shares which, without IPOs, are worth zero while the preferences remain in place if the company remains private – common shares remain behind preferred shares to which one owes $ 12 b +, "wrote Galloway.
SoftBank, the lead investor, would also like WeWork to float, even at a lower valuation, as the alternative is probably worse. SoftBank has invested billions of dollars in WeWork for a valuation of $ 21 billion in 2017, then again for a valuation of $ 47 billion in 2019, which suggests that it would require a sharp reduction if WeWork posted a lower course.
"If we stay private, the investment firm will have to reduce its holdings by 75% and still have no cash, the worst of both worlds," Galloway said.
SoftBank did not immediately respond to Business Insider's comment request. JPMorgan declined to comment.
Finally, Galloway noted that, according to WeWork's S-1 filing, WeWork relied on its initial public offering for a $ 6 billion loan from 10 banks.
Galloway called on US regulators to investigate the IPO, suggesting that SoftBank was backing it to flood the market with shares later.
He concluded ominously: "Prediction (s) .We do not go out.This is not lipstick on a pig, but Botox on a lame unicorn.If this is the case, it could to be bad, really bad.
"The price will be artificial, sitting on a throne of lies, and the eventual rush for release by Softbank and others, who bought shares only to be able (possibly) to sell more shares, could do shudder the class of unicorns and the wider market. "
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