Throughout the first half of 2019, IPO’s were for the most part relatively successful, although some of the most exciting offerings failed to live up to expectations while some of the least exciting offers ended up overperforming.
However, what is clear is that investors are now getting tired of the IPO market, no longer willing to give the same amount of excitement and enthusiasm they gave to companies like Uber and Lyft, both stocks whose shares tumbled significantly following their public offerings.
Another major stock that was planned to go public soon had announced it was postponing its IPO due to investor concerns. WeWork, a shared-workplace company, announced that it would be withdrawing its originally planned IPO.
In an exclusive story covered by the Wall Street Journal, WeWork’s parent company stated that they were postponing its IPO after worries about the company’s overall worth were raised by investors. WeWork had planned to begin a roadshow to market its shares this week before going public on the market next week but had decided to shelve the offering until at least October if not later in the year, possibly as late as December.
The truth of the matter surrounding the decision is that WeWork has been having trouble getting the offer off the ground in the first place, despite changing in valuation as well as revamping its corporate governance to be more appealing to investors.
Despite being one of the most richly valued start-ups planned to go public this year, this unexpected display of investor timidity is a massive blow for the company. Previously valued at $48 billion in an early fundraising exercise, WeWork had ended up settling for a much milder $15 billion to $20 billion valuation, if not lower, according to sources familiar with the matter.
“The We Company is looking forward to our upcoming IPO, which we expect to be completed by the end of the year. We want to thank all of our employees, members and partners for their ongoing commitment,” said the company in a statement Monday night.
In regard to the issue of corporate governance, investors have been worried about the co-founder and CEO’s large ownership stake of the company. Adam Neumann, who is the head of WeWork, has enjoyed hundreds of millions of dollars from selling his shares with the company while still retaining a significant control of the firm. From a financial perspective, potential investors are also worried about the fact that the company reported $1.61 billion losses for 2018, just barely below its $1.82 billion in reported revenues.
But maybe the biggest factor of them all pushing investors away from the IPO is that previous offerings have performed terribly. Last week saw the debut of SmileDirectClub (NASDAQ: SDC), a teeth-straightening start-up that saw its shares fall by 28% on its first day of trading. This was the worst debut for a U.S. listed company worth over $1 billion, and this has caused many investors to become fearful of the market.
Regardless, this certainly isn’t a good sign for WeWork. Whether you consider buying shares of the company or not when it goes public, you should be warned that there likely won’t be much market excitement surrounding this particular IPO when it does enter the scene.