WeWork more than doubles sales in first quarter

Rise in revenues to $342 million bolsters hopes for listing by shared office space provider

WeWork South Lake Union labs in Seattle.
WeWork Corp.
WeWork South Lake Union labs in Seattle.

WeWork more than doubled its sales in the first quarter of 2018 to $342m, according to an internal memo seen by the Financial Times, accelerating from the fevered growth the shared office space provider achieved last year and bolstering its hopes for a new fundraising and eventual stock market listing.

The company did not put a figure on its net losses for the period in its update to employees, but said adjusted earnings before interest, taxes, depreciation, amortization and its growth investments rose 137 percent to $26m in the three months to the end of March.

Occupancy at the offices WeWork rents rose to 82 percent at the end of the first quarter, up from 73 percent a year earlier, and it counted more than 256,000 members by the end of May.

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The figures are the first update to the private company's accounts since it tapped corporate bond markets with an inaugural $702m debt offering in April. WeWork is now looking at raising an undisclosed amount of new equity that could value the company at $35bn, Rajeev Misra, the chief executive of the SoftBank-led Vision Fund, told a conference this week.

SoftBank and the Vision Fund invested $4.4bn in WeWork last August at a valuation of $20bn. A new fundraising at almost double that level would establish WeWork as the most valuable venture-backed private US company after Uber.

"A year ago, we were told that WeWork was overvalued at $17bn for real estate," Mr Misra told the CogX conference in London on Tuesday: "Maybe it's overvalued, but I believe they'll be a $100bn company in the next few years."

Artie Minson, WeWork's president and chief financial officer, told the FT that the bond sale had "brought discipline to the company" by forcing it to complete quarterly earnings reports and focus on controlling its costs. He added that the offering was an exercise that could pave the way for a stock market listing.

"It's a great way for companies to get ready for a potential IPO," he said.

Mr Minson, a veteran of the cable industry who worked on the spin-offs of Time Warner Cable and AOL from Time Warner, did not give a timeframe for a flotation.

WeWork is attempting to rebalance its membership away from freelancers and entrepreneurs, towards larger companies willing to take out longer tenancies. Such "enterprise" members accounted for 24 percent of its member base by the end of the quarter, up from 14 percent, and Mr. Minson said it was not uncommon for them to take leases of three to five years or more.

In the days after the debt offering, the lossmaking group struggled to win over investors. Its bond initially slid in value, but has since pared much of its losses.

The bond offering raised eyebrows for the variety of aggressive adjustments, which turned losses into profits. Although it disclosed a $933m net loss for 2017, WeWork turned a profit excluding interest, tax, depreciation, amortization, share-based pay, other operating expenses, sales and marketing spending and the cost of opening new locations. This growth-adjusted ebitda was $49.4m for 2017.

"This is a business that I truly believe will be one of the largest companies on the planet," Mr. Minson said. "To do that you have to build a large very sustainable business and we certainly feel like we're on that path."

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