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Weak Investor Response Force WeWork To Delays IPO

Weak Investor Response Force WeWork To Delays IPO
A not so encouraging response from investors to the plans of the launching of initial public offering (IPO) of WeWork owner The We Company has forced it to postpone the plans which were slated to be initiated this month itself, according to reports.
The United States based office-sharing and renting firm was pushing ahead with preparations for launching a road show for investors for its IPO but decided to back away at the last minute, said reports quoting sources with knowledge of the matter. 
There has been pressure on the company for pushing ahead with the launch of its public listing in order to make sure it has enough funds for its planned expansion.
There have been multiple concerns about We Company in recent times which included issues related to the standards of its corporate governance, and the feasibility of its business model that is dependent on long-term liabilities and short-term revenue. Analysts are also concerned about the sustainability of its business model in the face of an economic downturn. These questions turned out to be quite embarrassing for the company in the run up to the launch of its IPO.
According to reports, We Company wants to be valued at between $10 billion and $12 billion at the IPO which was a very significant reduction from its earlier announced valuation of $47 billion that was accorded to it in January this year.
“The We Company is looking forward to our upcoming IPO, which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment,” the company said in a short statement.
If the We Company had pushed ahead with the launch of its IPO at that low valuation, it would have been a very significant turnaround in the growth of the venture capital industry over the last decade. the success of startups such as Uber Technologies Inc, Snap Inc and Airbnb Inc is accorded partly to the activities of the venture capital industry.
According to data provider Crunchbase, an IPO at the above stated valuation for We Company would have been lower than even the $12.8 billion in equity that it had managed to raise since its formation in 2010. It would also have been very damaging for the main backer of the company Japan’s SoftBank Group Corp because the Japanese investing company is currently trying to gather a fund of $108 billion from investors for forming its second Vision Fund.
The reports quoted sources saying that discussions on supporting the IPO by purchasing up shares worth between $750 million and $1 billion was being held by SoftBank. But even with the support from Softbank, We Company on Monday came to the conclusion that the IPO would not be able to garner more than $2 billion even though the company had sought to raise at least $3 billion from its public listing.
The company would need to arrange for alternative funding is the New York-based company did not meet its target of revenue generation within the end of the year.

Christopher J. Mitchell

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