In an all-hands meeting with employees last week, WeWork CEO Adam Neumann gave an update on the state of the business and reportedly joked that dealing with the Securities and Exchange Commission during the IPO process helped him understand Elon Musk better, according to The WSJ.
In my opinion, WeWork’s current predicament isn’t very funny. The co-working behemoth is reportedly considering a valuation for its IPO that may be below the already-slashed $20 billion. Some investors are reportedly even pushing the company to postpone the IPO. After Term Sheet reached out for comment on these points, WeWork declined to comment.
At this point, a looooot of people are counting on WeWork to go public, and the company is kind of stuck between a rock and a hard place. If it goes public at a significantly lower valuation than $47 billion, the optics wouldn’t be good for SoftBank (which is currently trying to raise it’s second fund). It would also be bad for employee morale if it doesn’t perform as expected. But at the same time, if SoftBank isn’t willing to plow billions more dollars into WeWork, then it has no choice but to go public to raise more capital. As Dan Primack noted on Twitter, WeWork’s $4 billion debt raise is contingent on the company going public. So this whole situation is just one big ¯_(ツ)_/¯.
There are also other factors to consider. If there really is an economic downturn on the horizon, WeWork might as well go public now before the market turns. On the flip side, WeWork as a public company during a recession doesn’t seem like the greatest scenario either. In its S-1, the company lists a recession as a potential risk factor, explaining that an “economic downturn or subsequent declines in market rents” could hurt its operations. It goes on to say: “While we believe that we have a durable business model in all economic cycles, there can be no assurance that this will be the case.”
In May, Neumann told Business Insider that a downturn could actually benefit the business. He says that WeWork is 50% cheaper than the average office in New York City, and that his company offers "flexibility and mobility," which helps in a slowing market, and because half of its members do business with one another, they could buoy one another. Buuuut let’s not forget these theories have never been tested given that WeWork has not experienced a global economic downturn since founding its business. And neither have most of its peers.
What do you guys think is the best possible path for WeWork at this point? Go public? Stay private? Raise more money from SoftBank? Email me at email@example.com with the subject line “WeWork Feedback,” and note that your response may be used in a future Term Sheet with your first name only.
MORE INSURANCE NEWS: Remember when I said insurance was sexy? Well, I wasn’t lying. Today, Root Insurance, a Columbus, Ohio-based car insurance startup, officially raised $350 million in funding at a valuation of $3.65 billion. DST Global and Coatue Management co-lead the round, and were joined by investors including Drive Capital, Redpoint Ventures, Ribbit Capital, Scale Venture Partners, and Tiger Global Management.
WHERE DID YOU GO TO SCHOOL: Pitchbook just released its 2019 rankings for the university programs that produce the most entrepreneurs that go on to raise venture capital funding. Here are the top 10 undergraduate programs:
1. Stanford University
2. University of California, Berkeley
4. Harvard University
5. University of Pennsylvania
6. Cornell University
7. University of Michigan
8. Tel Aviv University
9. University of Texas
10. University of Illinois
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