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WeWork May Reduce Its Valuation Ahead Of IPO By Tens Of Billions

WeWork is considering aiming for a valuation between $20 billion to $30 billion in its upcoming IPO—far less than its last valuation as a private company—Bloomberg News reported on Thursday.

The We Company, as its known now, was last valued at $47 billion after raising $1 billion in its Softbank-led Series H round in January 2019. (In tandem, Softbank bought $1 billion in WeWork shares from existing shareholders.)

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WeWork has raised $12.8 billion in primary, secondary and debt financing, according to Crunchbase. Its valuation has swelled as the company has rapidly grown, but it has yet to turn a profit.

The company’s revenue grew from $446.1 million in 2016 to $1.82 billion in 2018, according to its S-1 filing. While posting its torrid growth, the company’s operating losses increased from $396.3 million in 2016 to $1.69 billion in 2018.

What’s It Worth

To understand how WeWork’s valuation got so far ahead of its potential IPO price, let’s take a look at the company’s valuation history.

WeWork, based in New York and founded in 2010, raised its $17 million Series A in 2012. Its valuation at that point is unclear, but by the time of its $40 million Series B round in February 2013, the company had a valuation of $318 million.

The company reached the coveted unicorn status, a $1 billion valuation, after its Series C round in November 2013. The $157 million Series C brought the company’s valuation to $1.6 billion, more than four times what it was valued at the beginning of 2013, according to the Prime Unicorn Index.

WeWork had a pre-money valuation of $4.6 billion by the time of its $355 million Series D in October 2014. That pre-money valuation grew to $9.6 billion by its $433.9 million Series E in May 2015 and $16.2 billion by its $690 million Series F in November 2016. (Or, in post-money dollars, $4.96 billion, $10 billion, and $16.9 billion respectively.)

While the valuation of WeWork historically rose and the sums of capital it attracted scaled as well (a $690 million funding round is an enormous amount), the biggest amounts of cash come when Softbank and its Vision Fund showed up.

WeWork’s largest venture funding round to date was in August 2017, when it pulled in $4.4 billion from the Softbank Vision Fund for its multi-part Series G. Its valuation after raising the Series G shot to $20 billion. Softbank continued to lead WeWork’s later rounds (billions in convertible notes in November 2018 and the $1 billion Series H in January), eventually valuing the company at $47 billion.

From a $1 million seed round in 2011 to a $1.6 billion price tag in 2013 to a valuation of $47 billion this year, WeWork’s appreciation has been rapid. To see it slash its potential valuation would be surprising if we discounted the broad market pessimism concerning its price tag.

Other unicorns with high valuations (Uber and Lyft, for example) have failed to do as spectacularly on the public markets after their IPO as they managed while private. WeWork may be adjusting its private valuation to limit potential struggle after its debut.

Illustration: Li-Anne Dias.

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