WeWork co-founder and CEO Adam Neumann Photo by Noam Galai/Getty Images for TechCrunch

Amid reports of WeWork seeking an IPO valuation that’s less than half of its last private valuation, or Softbank, a major investor, pushing the company to postpone the IPO, Reuters reports the co-working company is pressing ahead with its plans to go public, leaving its largest investor, Softbank, with an austere choice: take a loss from a slash in valuation or put in more cash to keep the loss-making company afloat amid current expansion plans.

Reuters reports WeWork may seek a valuation of between $15 billion to $18 billion in an IPO, down from its last private valuation of $47 billion. Such valuation would not be far from a  total of $10.65 billion in equity and debt funding Softbank has put into WeWork since 2017. The Japanese company, which invested out of its $100 billion Vision Fund, could be facing a hefty loss if WeWork proceeds with its IPO. This would be an additional hiccup as it’s already $600 million in the red from an earlier investment in Uber.

WeWork’s S-1 filing shows $1.8 billion in 2018 revenue but with a $1.9 billion loss in the same period. In 2017, the New York-based company recorded $886 million in revenue, and $884 million in losses. WeWork’s cash burn doesn’t look good for a company that’s looking to debut on the public markets, where investors are highly concerned with a company’s profitability outlook. An example in this case is Uber, which has a high cash burn rate although less than that of WeWork. As of writing, Uber trades at roughly $35 a pop, down from $45 as at IPO debut.

A WeWork location in Sanlitun, Beijing image: WeWork

WeWork is said to be seeking between $3 billion to $4 billion in an IPO. The company has also arranged for a $6 billion debt facility that’s contingent on it raising at least $3 billion from its IPO. A sharp decrease in WeWork’s valuation would not look good for Softbank at a time it’s seeking investors for a second $108 billion Vision Fund.

Apart from its cash burn, WeWork has drawn bad press from controversial dealings with its CEO Adam Neumann, who has ownership interest in four commercial properties leased by WeWork, according to its S-1 filing. This means WeWork, whose dealings Neumann chairs and directs, pays rent to entities where he has financial interest, a signal of conflict on interest that doesn’t spell well for corporate governance. WeWork also paid Neumann $5.9 million in stock earlier this year for the trademark “We”, after it re-branded as The We Company. The deal sparked lots of bad press, with Neumann returning the payment in response. Such dealings have drawn controversy, sentiments and even satire from individuals and media outlets alike.

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