[NEW YORK] WeWork shelved its plans for an initial public offering on Monday, a startling retreat for a company that expanded rapidly in recent years as it sought to transform commercial real estate in the world's biggest cities.
The move is the clearest sign yet that investors are increasingly wary of ambitious young companies that have run up huge losses and might not become profitable for years.
WeWork's parent, the We Co, aimed to sell enough shares to raise as much as US$4 billion, and had lined up US$6 billion in a bank loan that was contingent on the IPO. Without a large infusion of capital, the company is expected to slam the brakes on its breakneck expansion. Analysts estimate that at its recent growth rate, it could run out of cash by the middle of next year. The company had US$2.5 billion in cash at the end of June.
Last week, Adam Neumann, We's co-founder, resigned as chief executive after the company and its investment bankers struggled to persuade money managers on Wall Street to buy its shares. Investors were put off by the company's losses and questions about its corporate governance.
WeWork in recent days has been renegotiating a new loan with banks led by JPMorgan Chase and Goldman Sachs to replace the loan it was expected to get after its public offering, according to people briefed on the matter. The banks are now offering less than the US$6 billion previously on the table, one of these people said.
The lenders want WeWork to raise fresh capital before they issue new loans. The company is looking to sell certain operations. And it is hoping to sell stock to private investors, including SoftBank, its largest outside shareholder, these people said.
WeWork has expanded so fast that it is now the largest private tenant in Manhattan and a major player in London, San Francisco and other major cities. It leases office space from landlords, refurbishes it and then rents it to individuals, small firms and large corporations like Amazon and UBS. WeWork's customers can leave after short periods, giving them greater flexibility than they might get with a traditional lease.