Tag: listing

WeWork forces founder forced to step down

Source: BBC

Adam Neumann led WeWork, the property firm he co-founded in 2010, to become a global juggernaut and a symbol for office cool.

The company has more than 500 locations in 29 countries and as recently as August, had viewed Mr Neumann as central to its fortunes.

But on Tuesday, WeWork announced that he would step down as chief executive and relinquish significant control over the company, after the firm’s plans to sell shares publicly ran into trouble.

It marks a startling fall from grace for the ambitious 40-year-old billionaire.

So what’s his story?

From kibbutz to co-working
Born in Israel, Mr Neumann served in the Israeli Navy before moving to New York to “get a great job, have tons of fun and make a lot of money”, as he put it in a 2017 TechCrunch interview.

He enrolled at Baruch College at the City University of New York in 2002, but dropped out just shy of graduation to go into business.

One of his early ventures was a baby clothing company that evolved into the luxury Egg Baby brand.

Later, he and business partner Miguel McKelvey, an architect, renovated an office space and sublet the property. They sold the business but the idea grew into WeWork.

In interviews, Mr Neumann – who finally got his degree in 2017 – has tied WeWork’s origin story to his own, linking his itinerant childhood and time spent living on a kibbutz to WeWork’s emphasis on communal working.

He told Israeli newspaper Haaretz in 2017 he sometimes even refers to WeWork as “Kibbutz 2.0”.

Easy money
Mr Neumann’s colourful personality once charmed investors, including Japanese investment giant Softbank, a major backer of WeWork.

Softbank Chief Executive Masayoshi Son reportedly worked out the terms of one of its investment rounds during a car ride, after a 12-minute tour of WeWork’s New York offices.

Softbank’s investments helped the company reach a peak valuation of about $47bn (£37.7bn) despite steep, ongoing losses – a mismatch that has drawn repeated questions.

Mr Neumann attempted to address that puzzle, telling Forbes in 2017: “Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue.”

Is WeWork really worth nearly $50bn?

Blurred lines
WeWork’s growth made Mr Neumann a billionaire, with an estimated net worth of $2.2bn, according to Forbes.

His glamorous personal life – his wife Rebekah is the cousin of actress Gwyneth Paltrow, while his sister Adi is a former model who was once a Miss Teen Israel – contributed to the buzz around the company.

But the mixing of work and pleasure – which had been a key element of WeWork’s culture – became a problem as the firm set out plans to go public.

Potential investors questioned the links between Mr Neumann’s personal finances and WeWork, as well as his decision to expand WeWork into areas of personal interest, such as surfing and a school.

They also raised questions about his judgment amid complaints about his hard-partying ways.

Magic fades
WeWork tried to respond to those concerns. Among other steps Mr Neumann returned $5.9m in stock he received for selling WeWork the trademark “We”.

But even the announcement on Tuesday that Mr Neumann would step aside and reduce his voting power failed to quell questions about WeWork’s long-term prospects.

Critics have long said WeWork was little more than a typical real estate company, and its shaky finances had been obscured by Mr Neumann’s personal style.

Why WeWork doesn’t work

Source: The Economist

With its stylish shared workspaces and chic occupants, lubricated by fruit-infused water and nitro coffee on tap, WeWork, a firm that rents out temporary offices, had seemed to be riding the wave of a new trend in managing desk-jockey life. But the nine-year-old private company has suffered a setback, announcing on September 16th that it would postpone an initial public offering (IPO) that had been expected to raise $3bn-4bn. Investors, it seems, cannot decide what the firm is worth.

They have four main worries. The first, and most glaring, is WeWork’s lack of profits. The firm argues that this is explained by the huge investments needed to secure economies of scale. It says that mature locations are profitable—revenues doubled during the first half of 2019 over the same period in 2018, to $1.5bn. But its net losses also rose, if more modestly, to $905m. A second concern is how the company would fare in a recession. It has taken on $47bn in lease payments but has only $4bn in committed future revenues from customers. A third bugbear is corporate governance. WeWork will issue multiple classes of shares that give its flamboyant founder, Adam Neumann, control with a minority stake.

The final concern is the company’s valuation. When it raised money in January, with funding led by Japan’s SoftBank, the firm was valued at a heady $47bn. Critics point to IWG, which offers shared offices under the Regus and Spaces brands worldwide, and has a market capitalisation of just $4.5bn (see chart). Already WeWork seemed willing to accept a much lower price tag for its flotation, seeking a relatively modest valuation of $15bn or less from its IPO. Even that seems out of reach and the company has, for now, dropped the attempt.

Mr Neumann’s claim that his firm will “elevate the world’s consciousness” is plainly silly. Even so, it is not fair to equate WeWork with the more conventional Regus. CBRE, a property-management firm, estimates that the flexible-work niche experienced “meteoric growth” of 25% in America’s top ten markets in 2018, with similar figures in big cities worldwide. WeWork’s innovations in work-place facilities have dramatically enlarged the size of the market for temporary offices. But investors need more certainty that it knows how to make money from it.

They will also be all too well aware that the shares of some stars of the new economy have disappointed of late.Uber, a ride-hailing firm, listed its shares at $45 in May on the New York Stock Exchange. Today they were trading at about $34.50. In March its rival, Lyft, had sold its shares on the Nasdaq exchange at $72; today they are worth about $48. Slack, a corporate-messaging service whose shares started trading on the NYSE in June at an opening price of $38.50, is now valued at about $26 a share. Unicorns are going a little cheaper these days.

By Lucinda Shen for Fortune

As of Monday’s market close, those who bought into Uber at its IPO are down roughly $1.4 billion.

But very early investors, and now, the bankers that helped take the company to market are in the green. Uber shelled out $106.2 million to a bevy of underwriters led by Morgan Stanley, per filings with the Securities and Exchange Commission. The group also includes Goldman Sachs, BofA Merrill Lynch, Barclays, Citigroup, and Allen & Company.

That comes as shares of Uber fell another 11% Monday—pulling its valuation down to $62 billion and representing a collective $1.4 billion loss for those who bought in at the company’s $45 IPO price. Assuming that Uber drivers took up all shares offered to them at the IPO price, they are collectively looking at paper losses of about $43.2 million.

On Friday, Uber CEO Dara Khosrowshahi sought to calm his employees regarding Uber’s stock price.

“Like all periods of transition, there are ups and downs,” he wrote in a note to workers.”Remember that the Facebook and Amazon post-IPO trading was incredibly difficult for those companies. And look at how they have delivered since.”

In particular—Facebook’s IPO may echo strongly with that of Uber’s. That IPO too involved Morgan Stanley in the lead role. Following a lackluster first day of trading, the bank’s fees, as well as trades stemming from its role as the lead in the deal, were heavily scrutinized. A Massachusetts regulator later fined Morgan Stanley $5 million over the IPO, arguing the underwriter had selectively disclosed information to certain clients over others.

It remains to be seen whether similar investigations will follow Uber’s IPO. But for now, count the banks as one of the few parties that have profited from this deal.

By Tom Head for The South African

Naspers, the holding group of Africa’s biggest pay-TV organisation MultiChoice, have decided to list the business on the Johannesburg Stock Exchange. The move comes as traditional media outlets consider ways to stem the momentum of streaming services like Netflix and Hulu.

The shares will go live on the JSE on 27 February 2019. Investors will be able put their money into MultiChoice if they believe it’s a sound financial investment; something that CEO Calvo Mawela firmly believes is already true:

“With strong financials, the flexibility of an ungeared balance sheet and deep local knowledge, we hope to deliver excellent returns to shareholders over time.”

MultiChoice to receive boost in its battle with Netflix et al
But how will this make it more competitive with the likes of Netflix? Well, put quite simply, opening up a more diverse range of investment will eventually improve the worth of MultiChoice. Naspers are now narrowing a discount between its own market value and the value of its stake in Chinese tech giant Tencent, according to MoneyWeb.

By floating the shares on the JSE, an increase in net worth will allow MultiChoice to spend more money on quality programming and any potential streaming developments of their own in the future.

What is the MultiChoice share price estimated to be worth?
Meanwhile, South African Market Insights (SAMI) told us that this is perhaps the best time for Naspers to make this move. While subscriber numbers are up, their total revenue growth has limped along at a slow pace. They also estimate that MultiChoice will be worth R211 a share when they go public.

“MultiChoice has seen strong subscriber numbers grow over the last three years – up by 29.4% – while revenue over the same period only grew by 1.4%. Their trading profit margins are in decline too.”

“But looking at the number of shares MultiChoice plans on issuing, it will give the company a valuation of R94.8 billion, which will make MultiChoice the 21st largest firm listed on the JSE at around R211 a share.”

What happens next?
MC have approximately 13 million subscribers in Mzansi. No company is too big to fail, but SAMI have warned that there will be a “feeding frenzy” when the shares are first made public, as investors scramble to get a slice of the pie at the earliest opportunity. We will only get a true reading of its popularity a few months after it has listed.

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