WeWork is looking to raise between USD 3 Billion and USD 4 Billion in debt before hitting the public market in a move designed to raise investor confidence. By raising a substantial amount of debt, WeWork will be able to create a path to long-term profitability – a path the Company has not yet found.
A debt offering is an alternate method of raising capital as opposed to raising funds via an IPO. By offering debt rather than equity, the Company will not dilute the ownership or income per share of current shareholders. WeWork will, of course, raise funds during its IPO, but the funds from the debt offering are a separate entity. Money raised from WeWork’s debt offering could swell to as much as USD 10 Billion in the coming years.
The Company has filed for an IPO but hasn’t laid out a concrete timeline.
Representatives for WeWork have declined to comment on the debt offering. The Company has also had discussions with investment banks Goldman Sachs and JPMorgan Chase regarding the move. Both institutions declined to comment.
WeWork has had tremendous issues proving that it can become a profitable company. Losses more than doubled last year, growing to USD 1.93 Billion. However, revenue also doubled to USD 1.82 Billion in the same time frame. Although its revenue growth is a positive sign, the growing debt demonstrates the Company’s inability to manage overhead costs.
Softbank Group Corp., headquartered in Tokyo, increased its stake in WeWork by USD 2 Billion in January. The deal was billions of dollars below what WeWork had hoped for, however. This impeded on the Company’s hopes to raise a sufficient amount of money to fuel growth and buy out existing shareholders.
Earlier this year, WeWork was rebranded to become The We Company. The We Company produced revenues of USD 728 Million in the first quarter. But the Company still posted a net loss of USD 264 Million. The We Company has recently been valued at USD 47 Billion in a private fundraising round.
Headquartered in New York City, The We Company provides shared workspaces for technology startup communities, and services for entrepreneurs, freelancers, startups, small businesses, and large enterprises. The Company was founded in 2010 by Miguel McKelvey and world-renowned businessman Adam Neumann.