Markets Wired

Well on 30 September, WeWork Companies filed a motion to withdraw their IPO request. This was a very odd and startling approach by WeWork Companies. One of the reasons of the withdrawal of the IPO request was that Adam Neumann who was the co-founder and also the chief executive of WeWork Companies resigned from his post as Chief executive because the company and the investment bankers failed to persuade the players of the Wall Street to invest in the company. Investors were put off by the company’s losses and questions about its corporate governance.

WeWork’s parent, the We Company aimed to sell enough shares to raise as much as $4 billion and had lined up $6 billion in a bank loan that was contingent on the I.P.O. Without a large infusion of capital, the company is expected to slam the brakes on its breakneck expansion. Analysts estimate that at its recent growth rate, it could run out of cash by the middle of next year. The company had $2.5 billion in cash at the end of June.

WeWork has been negotiating a loan with a bank that is led by JPMorgan Chase and Goldman Sachs. It was rumored that the company will get its loan after the public offering. But after the withdrawal of the request of the IPO, the banks have now decided to offer amount which is $6 Billion less than the original amount. The reason for this was that the lenders want WeWork to raise fresh capital before they issue new loans. The company is looking to sell certain operations and it is hoping to sell its stock to some private investors including Softbank, who is the largest outside shareholder.

WeWork is a private tenant in Manhattan and a major player in London, San Francisco and other big cities that has expanded in a very short period. WeWork leases office space from Landlords, refurbishes the leased office space and then rents it to different firms, organization or even to the individuals.  This rent agreement provides flexibility to the customers of the company as the customers can leave whenever they want, without any instructions.

The company was booming and it is hard to believe their situation. But the real concern is for the Landlords and the tenants because now they will develop a perception that the market is in danger and it is best to stay safe in these moments of distress.