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WeWork postpones IPO

WeWork co-founders Miguel McKelvey and Adam Neumann (Credit: FT)

WeWork postpones its highly anticipated IPO. The company couldn’t raise money at a 75% discount to its most recent $47 billion private valuation.

  • Looming problem: Cash! WeWork desperately needs capital to continue to progress on its current growth path. Earlier this year it signed up for a $6 billion credit facility, which is contingent on it raising $3 billion of equity, the WSJ noted.
  • Interesting note: SoftBank protected themselves with something called a “down round” provision. In this case, it appears to have taken the form of a $1 billion convertible note that would become equity in the event the valuation tumbles in the next financing round. This can cause a downward spiral disrupting both share dilution and valuation… Companies rarely strike good deals with their backs to a wall.
  • WeWork blames messaging: In a company wide meeting yesterday, Neumann said that the company needs to sharpen its story and narrative before it starts its investor roadshow. He said he is “humbled” by the IPO stumbles and admitted he needed to learn more about running a public company, according to CNBC.
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