A WeWork location in Boston. Image Credit: Bloomberg

New York: The pitch was beguiling: WeWork could soon become a $65 billion (Dh238 billion) company.

That’s what Goldman Sachs Group Inc. bankers were saying only earlier this year. Banks up and down Wall Street were salivating at the prospect of steering the hipster office-sharing company onto the stock market. Never mind that it was losing billions.

Now, with questions swirling around WeWork’s business prospects, the hype has run headlong into reality. By Thursday, Wall Street was putting a new value on WeWork: as low as $20 billion. Maybe. And that’s if the company even manages to go public in the months ahead.

Reports surfaced that the company was considering delaying the initial public offering as it assessed investor demand and explored seeking additional private funds. But as of late on Friday the company was planning to move ahead and will schedule meetings with potential investors, known as a roadshow, as soon as next week, according to people familiar with the situation.

Still, the situation could easily change. Some people familiar with the deliberations have signalled a possible delay of months, if the IPO happens at all.

SoftBank talks

The company is also in talks with SoftBank Group Corp., its biggest investor, for more financing that could delay the IPO even further and force its valuation far lower than the $47 billion it was worth at the beginning of the year, one of the people said.

Co-founder Adam Neumann’s preference is for the company to go public, one of the people said. The start-up has a big incentive to complete the listing. Its access to a $6 billion credit facility is contingent on it successfully raising $3 billion in a stock listing.

WeWork and Goldman Sachs declined to comment.

It’s a remarkable comedown for WeWork, the signature grandiose-dreaming, money-chewing start-up of these financial times. Seemingly overnight, its initial public offering has gone from one of the most hotly anticipated IPOs in years to a referendum on the era of so-called unicorn start-ups.

No profits

The New York-based venture, yet to turn a profit in its nine-year existence, is said to be considering a market debut at a valuation of $20 billion to $30 billion, Bloomberg News reported earlier this week. That’s just a fraction of the $65 billion valuation that Goldman Sachs, one of its lead bankers on the deal, told people close to WeWork that it could rise to after the listing, one of the people said.

Goldman Sachs made that prediction at a meeting where it was invited to pitch for a role on the future listing, according to another person with knowledge of the matter. SoftBank vice-chairman Ron Fisher and Mark Schwartz, a WeWork director representing the Japanese conglomerate, arranged the meeting, held sometime in the first quarter, the people said.

At the time, $65 billion seemed in the ballpark, at least based on the prevailing market mood. In January, SoftBank had injected more financing into the company at a valuation of $47 billion. Investor demand to buy newly-listed stock of the largest unicorns was also still running hot.

But investors soon turned leery about investing in a promising but unproven company after Uber Technologies Inc. and Lyft Inc. fell substantially after their market debuts in the spring.

Big losses

Then, last month WeWork filed its preliminary prospectus that revealed the company had racked up billions in losses, was burning through cash and had set up an arcane corporate structure riddled with potential conflicts. In just the first six months of 2019, WeWork lost $690 million, bringing its total losses to almost $3 billion in the past three years, the filing showed.

Investors greeted the details with sometimes blistering criticism, questioning whether the company could ever find a way to make money. Given those results, some said, WeWork was hardly worth the $47 billion valuation that SoftBank had put on it months earlier.

But even a $20 billion valuation, which is roughly six-times its disclosed $3.3 billion in run-rate revenue, is a stretch when compared to its largest publicly-traded rival, IWG Plc, which trades at about 1.3 times.