Abstract

WeWork, the New York-based start-up that revolutionized commercial real estate by offering flexible shared workspaces, attracted massive investments from the likes of SoftBank, Goldman Sachs, JP Morgan Chase &Company, and many other top private equity players. WeWork’s valuation soared to more than $47 billion in January 2019. But, its mandatory filing of S 1 papers on August 14, 2019, with the SEC to go public left investors unconvinced as they felt that the company did not deserve such a high valuation. WeWork’s complex corporate structure, questionable corporate governance and business practices, and less than anticipated financial projections, drove away potential investors. Adam Neumann (Neumann), WeWork’s CEO, found himself in the middle of the controversy with some analysts questioning the transactions between him and WeWork. The controversy led to a failed IPO and to Neumann exiting WeWork. The case study captures the growth story of WeWork and its valuation journey through a series of fundings. It delves deeper into the issues of complex corporate structures, a non-transparent corporate culture, questionable related party transactions, and iconic entrepreneurs and valuations which might not match the fundamentals. The case also gives an opportunity to students to analyse the SPaaS industry, work out the relative valuation of WeWork with a close industry peer, and analyse the financial statements of WeWork.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Understand the complexity in the valuation of unlisted companies.
• Examine the challenges of complex corporate structures and importance of having a simple structure for start-ups.
• Understand the challenges posed by related party transactions on the valuation of firms.
• Drive home the point that fundamentals drive the valuation rather than hype.
• Analyze the financial statements of companies.

Keywords

WeWork; We Company; Adam Neumann; IPO; Corporate Governance; Related Party; Space-As-A-Service (SPaaS); SoftBank; Masayoshi Son; ARK Fund; SpaceMob; We Company; Regus; IWG; Series–H