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After Uber, Investors Dodged a Bullet in the WeWork IPO

Last Updated September 23, 2020 1:03 PM
Gerelyn Terzo
Last Updated September 23, 2020 1:03 PM

It’s official. Adam Neumann is no longer at the helm of the workspace startup he founded, WeWork, amid a stalled IPO that has shattered the dreams of both the company and its backers for a huge payday. We couldn’t ignore the similarities between WeWork and another tech unicorn that managed to pull off its debut in the publicly traded markets just months ago, Uber.

If investors learned anything from the Uber IPO, it’s don’t believe the hype. Since going public in May, Uber has shaved approximately 30% off its value, earning the rideshare play the reputation as one of the single-worst IPOs in the past decade. WeWork was inching closer and closer to following in its tech-unicorn peer’s footsteps, fetching a valuation of nearly $50 billion at the start of the year. Now that they have been dealt a reality check, WeWork would be lucky to be worth $10 billion, if that, and investors are miraculously saved from falling off the same cliff that lured them into Uber and Lyft stocks for that matter. For its part, WeWork appears to be looking at the glass half-full.

Trader Josh Brown, CEO of Ritholtz Wealth Management and contributor on CNBC’s Fast Money, in the below post urges investors to remember:

“Wall Street was this close to selling you WeWork at a $50 billion valuation. They were ready to go, they were locked and loaded. The road show was planned. Everything fell apart at the last minute.”


WeWork’s Tangled Web

Besides both having CEOs who were ousted (Travis Kalanick and Adam Neumann for Uber and WeWork, respectively), another common thread between the unicorns is that Wall Street banks were willing to underwrite these IPOs at ridiculous valuations, $84 billion for the rideshare play  and $50 billion at its peak for WeWork. Incidentally, Morgan Stanley led the Uber IPO and until recently was part of the underwriting team for WeWork. Morgan Stanley bankers reportedly hightailed out of the deal  after being overlooked for the lead-underwriter role. The honors instead wen to JPMorgan. To its credit, Morgan Stanley slowed the debt spigot  pouring into WeWork, which according to Bloomberg may have cost the bank the high-profile role in the IPO. WeWork has spun a tangled web, as in order to repay the debt it has inherited the IPO has become vital – not a luxury.

With Neumann being named as the non-executive chairman of We Co., WeWork is reportedly adopting a dual-CEO structure  in an attempt to clean up the governance issues that plagued the doomed IPO.

Perhaps the WeWork circus will prevent Wall Street from pushing the next overvalued unicorn to investors hopelessly chasing the “smart money.” Unfortunately, however, a zebra doesn’t usually change its stripes.