The Wall Street Journal previously reported WeWork has had discussions with SoftBank about an investment that would allow the company to go public in 2020.The discussions about how to proceed follow the realization that public markets will initially value We at a much lower valuation than the company’s last private financing round.
Sources told CNBC Thursday that the company likely won’t be able to garner a valuation of $25 billion from an IPO. That’s at least $22 billion less than WeWork’s $47 billion private valuation.
SoftBank has invested about $10 billion in WeWork, including a most recent $1 billion investment that valued the company at $47 billion.
CEO Adam Neumann, the largest holder of WeWork stock, may want to increase his liquidity options now if he feels WeWork’s chances of flourishing are only going to get worse.
If SoftBank won’t provide WeWork with billions more to help sustain its private valuation, WeWork may have no choice but to move forward with its IPO particularly, as Dan Primack of Axios tweeted, because the company’s $4 billion debt raise is contingent on the company going public.
If investors aren’t willing to give WeWork the same leash as other money-losing technology companies, such as Amazon and Netflix, a recession is only going to hurt the company’s prospects in the public markets.
While WeWork may argue its business model is recession proof, it’s more likely that public markets will treat the company like most commercial real estate entities, which typically struggle during downturns as companies lay off employees and lower office space costs.