High life: Adam Neumann, CEO of WeWork, lived a lavish lifestyle and cashed in hundreds of millions before attempting to list the company. (Eduardo Nunoz/Reuters)
Although there has been major turbulence at WeWork’s headquarters in New York, with its chief executive and founder Adam Neumann being ousted and it withdrawing its initial public offering (IPO), it appears to be business as usual at WeWork’s swanky branch in Johannesburg.
WeWork specialises in uber cool co-working spaces. In August, it opened its Rosebank offices, which span six floors of the 15-storey building, The Link and already has 200 of what it calls “members” — individuals and groups who use its facilities.
Redefine Properties, which is in charge of The Link, said in June that the building is worth R133-million and WeWork is leasing 60% of it.
A sneak peek at one of the glass-walled floors showed a hive of activity, the members in meetings or busy working on their laptops. The open work area is decorated with colourful furniture and there is also a plant-filled patio outside.
WeWork plans to open offices in Sandton and Cape Town too. The Mail & Guardian visited the site in Sandton and it looked as if most of the work that requires heavy lifting is done.
A spokesperson for the company, based in London, told the M&G that its plans to grow globally would continue.
WeWork, which has leases valued at $18-billion, reached a valuation peak of $47-billion in January, after Japanese tech giant SoftBank made an investment of $10.65-billion for 29% of the business.
The company, which began operations in 2010, has a presence in more than 528 locations in 111 cities in 29 countries. It has more than 50 locations in New York City and is on its way to becoming the in Manhattan, according to the Coworking Resources publication.
The company’s front man, Neumann, is a charismatic, hard-partying Israeli with long hair and a penchant for leather jackets and tequila, The New York Times reported. He also used the company to fund his pet projects and maintained a lavish lifestyle complete with private jets and luxury homes.
TechCrunch reported in July that Neumann cashed out more than $700-million ahead of WeWork’s initial public offering. It said the size and timing of the payouts, made through a mix of stock sales and loans secured by his equity in the company, was “unusual”, because “founders typically wait until after a company holds its public offering to liquidate their holdings”.
Hoping for a spectacular IPO in August, Bloomberg reported that the company was considering seeking a valuation of up to $30-billion, but that it could end up closer to $20-billion.
This is after the company’s financial results revealed that it had incurred operating losses of $1.37-billion and spending losses of $1.5-billion.
But there were also signs that market sentiment against high-flying, loss-making tech companies had turned; with the IPOs of both e-hailing companies Uber and Lyft disappointing.
“Investors can live with big losses if they believe that a company can one day earn big profits and weather storms along the way.
“Analysts and industry executives said there were good reasons to doubt that WeWork, which operates in the cut-throat and cyclical market for office space, could achieve either goal,” The New York Times reported.
Beside concerns of profitability, there was a worry about how WeWork spent money on refurbishment and the duration of its leases.
The New York Times said: “The company leases buildings from landlords and spends a lot to turn them into attractive spaces. But WeWork’s leases run about 15 years on average, much longer than the average two-year commitments its customers make to the company. If WeWork loses many tenants during a recession, say, the company may be caught short.”
On September 30 the company’s co-chief executives, Sebastian Gunningham and Artie Minson, said in a statement that they are postponing the IPO to focus on their core business of which the “fundamentals remain strong”.
Business Insider reported that WeWork plans to retrench 3000 to 5000 workers out of its 12500 employees, and sell some of its assets.
The Wall Street Journal reported Neumann would remain nonexecutive chairman.
Tshegofatso Mathe is an Adamela Trust business reporter at the Mail & Guardian