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Maybe WeWork Isn’t Such a Good Investment

Say Contributor

WeWork is going public soon, and its IPO has been called one of the most feverishly anticipated since Uber’s. But is the company really all it is cracked up to be? Work It Out WeWork was founded nine years ago in New York to solve the problem affecting businesses in many major cities: scarcity of space. WeWork provides workspaces to start-ups, small businesses and freelancers, and up to four beers a day. The company was last valued at $47 billion, and is set to go public next month. But some critics think this is yet again a case of a unicorn investment too good to be true. Not Working? Forbes has pointed out a number of flaws in WeWork’s business model, starting with the idea that leasing a space and then subleasing it to other businesses is hardly the sort of “cutting edge” idea that WeWork likes to present itself as. The company’s operating expenses are growing about as quickly as its revenue (it’s not like New York real estate is getting any cheaper), and last year it reported negative cash flow of $176 million. Even as it keeps adding locations, its losses continue to increase, as earlier this year it reported a $264 million dollar loss in the first quarter. Can We Not? Questions about a company’s profitability are important, but also very common, and it’s not unusual for a big company to take a long time to actually make money. (See Netflix.) But the bigger concern some analysts have is how Co-founder and CEO Adam Neumann runs the business, as he has pulled some truly peculiar moves. He has taken loans from the company to buy property, which he then leased to his own company which raised eye-brows, and he had the company pay him $5.9 million personally in order to use the “We” trademark. Again, for his own company. But aside from garnering a reputation for milking a business that’s not yet turned a profit, he has also introduced a three class classes of shares, going beyond the increasingly common dual stock share system by giving himself 20 votes per share, as opposed to the usual 10 votes per share, insuring his complete domination of the company. This means that investors will have no say in the direction of the business, and with limited options to check the company if Neumann makes a mistake, which leaves some critics skittish. And it’s worth pointing out that Uber’s IPO didn’t end up so hot. -Michael Tedder Photo: Brendan McDermid / REUTERS