WeWork Said To Hunt Fresh Access To Capital Ahead Of IPO

Morning Markets: I cannot wait for this IPO.

WeWork is something akin to the Tesla of the private tech world: Everyone has an opinion, usually a strong one, and it isn’t clear where the company will wind up in the end.

Fans of the company view its capital expenses and stiff losses as merely an exercise in moat-building. Detractors view the well-financed private concern as a real estate play masquerading as a tech company, replete with mispriced revenue multiples and an impending hangover built into its valuation.

Reading those paragraphs I presume you’re already mouthing your own view, either pro or not. But regardless of your perspective, or my own, WeWork is chugging along today, doing its own thing. And it’s looking to raise more money to keep doing so.

News broke yesterday that WeWork, the well-funded purveyor of up-market coworking spaces for individuals, and, increasingly, larger companies, is looking to raise $2.75 billion through a credit facility before going public.

So What?

A few reminders, I think. First, WeWork has raised capital through debt before. It sold $702 million in bonds back in 2018. Bonds and credit facilities are pretty different substances of course, but a prior appetitive for debt-instruments is useful context to understand the impending credit line.

(SoftBank also lent the company $1 billion. In other transactions, the SoftBank Vision Fund has invested further billions.)

Second, WeWork is a capital-intensive business. Its fundraising history is, literally, epic. You could write a poem about it. And it would spool into a lengthy recitation given the number of characters in the tale, and the sheer number of events that WeWork has racked up over the years. Odysseus, forget the cyclops and both Scylla and Charybdis, top this:

And finally, WeWork is going public. Companies that go public often snag some extra capital along the way, or pick up a debt facility. It’s smart. Of course, a $2.75 billion debt facility is huge, but WeWork doesn’t do small, and it doesn’t do cheap.

And it will probably get what it wants. Here’s Bloomberg on why:

Securing a credit line from Wall Street often precedes an IPO. Companies going public routinely reward banks that make big credit commitments with roles in their IPOs, with lenders sometimes offering better terms on the financing in return.

After nearly $13 billion in primary and secondary and debt transactions, WeWork is gearing up for a nearly $3 billion credit facility and then an IPO that will prove capital-accretive provided it goes off.

I don’t know either. Perhaps WeWork is correct and all this is it building, literally, an unbeatable network of locations that will in time spin off enough cash to finance the empire’s maintenance. It’s certainly getting a lot of putatively smart money to help it realize the vision.

Illustration: Li-Anne Dias.