WeWork wants to raise $4 billion in debt to drive growth before IPO

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Updated: 09 July 2019
  • Shared office space manager sets out plans to raise up to $4 billion in debt prior to IPO
  • The move is designed to drive growth and increase investor confidence following underwhelming public debuts for Lyft and Uber
  • WeWork posted a $264M loss in Q1, a $1.82M deficit in 2018; revenue doubled to $1.82B last year

Shared workspace tech company WeWork is hoping to raise more than $3 billion in debt this year ahead of a possible lucrative initial public offering (IPO), as it attempts to strengthen investor sentiment and confidence in the company before a share sale.

The Wall Street Journal reported the news on Sunday after citing a source close to the matter. Several investment banks are believed to be working on a deal including JPMorgan Chase & Co and Goldman Sachs after WeWork’s Chief Executive, Adam Neuman, met leading figures from both companies last month.

The debt offering is now viewed as a launching pad for a potential IPO as it will provide investors with peace of mind that it can deliver sustainable profits. WeWork posted losses of $1.93 billion in 2018, though its revenue did grow by 100% to $1.82 billion during the same period.

WeWork is believed to have reassessed its IPO plans in recent months after the lacklustre public market debuts for startups Lyft and Uber Technologies, who both launched offerings to considerable fanfare before drawing the ire of investors and analysts for loss-making activities.

WeWork has been targeting a debt sale for several months with Bloomberg first breaking news of a $2.75 billion credit line in May, which came several weeks after the company filed confidential papers for an IPO with the U.S Securities and Exchange Commission. However, there are no official details on exactly when WeWork could list.

The shared office space startup was founded back in 2010 and now operates in 100 cities across 500 office locations in the United States. Its bold and modern approach to workspaces has helped to revolutionise office practices around the world, and it was most recently valued at $47 billion.

However, investors still need convincing on profitability, and the debt offering should go some way to driving growth and laying the foundation for sustainable returns. The WSJ reported that the debt could eventually rise to $10 billion, though it is not yet certain that the offering will go ahead at all.

In other IPO news, Medallia Inc. confirmed pricing details for its IPO on Monday. The enterprise software company is offering 13.325 million shares at $16-$18 per share, which would result in around $240 million being generated in proceeds and a $2.19 billion company valuation. Underwriters for the deal include Citigroup, Wells Fargo Securities and BofA Merrill Lynch.

Medallia says it will soon list on the New York Stock Exchange under the NYSE:MDLA ticker. The San Francisco-based company posted $261.2 million in revenue and a $70.4 million net loss in 2018.