WeWork will be the ‘most ridiculous IPO of 2019,’ analyst says

Update privacy choices
FINANCE

Brooke DiPalma
Yahoo FinanceAugust 24, 2019, 3:46 PM UTC

WeWork is reportedly gearing up to go public under the ticker “WE” in September.

The co-working space startup revealed a $900 million loss in the first half of 2019 in its initial public offering filing earlier this month, up 25% from the year prior. The widening loss left some analysts bearish on the company, but Sam McBride of New Constructs Investment Analyst went as far as to call WeWork the “most ridiculous IPO of 2019” in his latest note.

WeWork is reportedly looking to raise $3.5 billion, which would make it the second-largest IPO of 2019 behind Uber (UBER). It also has a reported $47 billion valuation, which McBride contends it achieved by positioning itself as a tech company rather than a brick-and-mortar leasing business.

“This is a real estate leasing business that slapped a bunch of tech lingo on,” McBride told Yahoo Finance’s YFi AM on Friday.

In WeWork’s S-1 filing it reported a net loss of $904.65 million in just since siz months prior to June 20th. That’s verse $722.89 million year over year.

The ‘same basic business model’ as IWG
WeWork was founded in 2010 in New York City to provide a co-working space for startups and freelancers, and it has expanded to 528 locations in 111 cities and 29 countries. It also has expanded into other businesses, including a co-working space called WeLive and a private school called WeGrow.

McBride says the idea behind the company’s main business is “nothing new.”

A WeWork office is seen in New York City on July 19, 2019. Photo by TIMOTHY A. CLARY / AFP) (Photo credit should read TIMOTHY A. CLARY/AFP/Getty Images)
“IWG (IWG.L) is a European company, same basic business model, they take out long-term releases on properties, turn them around to lease them short-term to tenants, they have a $4 million market cap,” McBride told Yahoo Finance.

McBride attributes WeWork’s relatively high valuation to the fact that “they’ve taken on a bunch more risk.” IWG operates in 1,000 cities across the globe, while WeWork focuses on high-priced cities like New York, San Francisco, Los Angeles, Seattle, Washington D.C., Boston and London.

A‘lot of pressure’ in a recession
WeWork was founded after the Great Recession, so it has not had to weather an economic downturn — and McBride thinks WeWork only works during times of economic expansion.

WeWork is “trying to move more toward the high-end, toward the bigger enterprises since about 40% of their revenue is from their members that are bigger companies with over 500 employees,” McBride says.

While WeWork might argue that its corporate customers would consider its co-working spaces to be an inexpensive option during a downtown, McBride thinks that won’t be the case. As companies face economic headwinds, he noted, they typically lay off workers and reduce their office space.

READ MORE:

Cisco, Global Citizen announce multimillion-dollar partnership to help end poverty

How McDonald’s is using technology to tell you what you want to eat

Why the hard seltzer summer trend is more than a fad

Read the latest financial and business news from Yahoo Finance

Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, YouTube, and reddit.

37 Reactions
What to read next

Edelman: Endless federal red ink may doom Social Security recipients
Yahoo Finance

How China could be ‘shooting themselves in the head’ amid trade war: Economist
Yahoo Finance Video

Elizabeth Warren calls student loan appointment ‘an outrageous slap in the face’
Yahoo Finance

These people are most likely to lose their jobs first in a recession
Yahoo Finance

Lamborghini teases a new, possibly hybrid supercar with a stylish photo
Mashable

Companies respond to President Trump’s China demands
Yahoo Finance Video

The future of consumer payments
Yahoo Finance Video

Consumers are ‘starting to see the pain’ from the trade war
Yahoo Finance

Negative interest rates are coming and they are downright terrifying
Yahoo Finance

Proof that Popeyes is winning the chicken sandwich wars
Yahoo Finance

Bill Gates Says This Type of AI Will Be Worth “10 Microsofts”
Motley Fool

Bulltick Head of Research and Strategy: ‘I don’t see a recession on the very near term horizon’
Yahoo Finance Video

WeWork will be the ‘most ridiculous IPO of 2019,’ analyst says
Yahoo Finance

Britain’s leader says trade deal with US won’t be easy
Associated Press