The stakes are high. According to a Bloomberg dispatch today, WeWork is set to raise up to $6 billion in a two-part debt offering, but that deal comes with a caveat: “banks will have to make good on their commitments only if at least $3 billion is raised” in the IPO. The company was most recently valued at $47 billion in a private fundraising round led by SoftBank Group Corp.
With that backdrop in mind, let’s take a stroll through WeWork’s most recently published audited financial results (Ernst & Young LLP did the honors) recently obtained by Grant’s. Despite the company’s imminent public debut, accessing the data is not easy. The documents are only available online, and printing is disabled.
Each page is stamped “confidential,” with the recipient’s name, along with the date and time of publication. Unlike most web-based financial statements such as those domiciled on sec.gov, searching for specific terms is disabled. Now, to the figures. In the quarter ended March 31, revenues footed to $728 million, more than doubling year-over-year from $342 million in first quarter 2018. Similarly, total WeWork memberships rose to 371,000 in the fourth quarter, compared to 174,000 at year-end 2017.
Unfortunately, increased scale has yet to provide any relief to the torrent of red ink. So-called community operating expenses (“exclusive of depreciation and amortization”) rose at a similar clip, doubling to $581.5 million in the first quarter from $288 million, while WeWork’s operating loss jumped to $637 million from $296 million year-over-year. Sales and marketing expense rose to $151 million, or 21% of revenues, from $63 million (19% of revenues) in the year ago period.
Meanwhile, community-adjusted Ebitda (or, adjusted adjusted adjusted Ebitda), WeWork’s signature metric, rose to $169.5 million in the first quarter from $95 million year-over-year. That gain failed to keep pace with the jump in revenues, as the “margin” declined to 27% from 29.2%.
While the financials provide little fodder for optimism, the company looks for other ways to impress investors. On July 30, CNBC reported WeWork was in talks to acquire startup SpaceIQ, which sells software to aid the efficient use of office space, a move which “could help WeWork convince Wall Street that it’s at least somewhat of a technology company.”
The bond market seems to need some persuasion. Single-B-plus-rated WeWork’s senior unsecured 7 7/8 notes due 2025 last changed hands at 96.5 cents, for a 8.66% yield-to-worst and 712 basis point spread to Treasurys. That’s well above the 491 basis points at issuance. By comparison, the Bloomberg Barclays High Yield Index has seen its option-adjusted spread widen by just 63 basis points over that period, to 397 basis points at Friday’s close.
Meanwhile, CEO Adam Neumann is ringing the register. On Thursday, The Real Deal reported that Neumann “is putting a property that he owns as a personal investment in Greenwich Village up for sale on the open market... The 11-story building at 88 University is place is almost fully leased to WeWork and is about to come to market with an asking price north of $110 million.” That follows the July 18 bulletin from The Wall Street Journal that the WeWork boss has already cashed out more than $700 million from the company, news that Neumann’s associates downplayed by noting that “Neumann’s borrowings against some of his WeWork shares indicate that he is bullish on the company’s long-term prospects.”
~ Almost Daily Grant's , August 5, 2019
No comments:
Post a Comment