The We Company, parent of the shared-office provider WeWork, has publicly released the prospectus for its initial public offering, providing a wealth of previously unseen information on its astonishing growth, the risks the business faces, and the strategy being pursued by co-founder and chief executive Adam Neumann.

The prospectus shows the escalating cost of expansion with losses blowing out to $700m in the first half of 2019 even as revenues doubled. The company previously reported it lost $2bn in 2018. But it was nonetheless valued in January at $47 billion in a private fundraising round.

The company has turned to a complex corporate structure for its listing that hands tax benefits to Mr Neumann and some other early investors, as the Financial Times first reported last week

FT reporters are combing through the filing and will update the findings progressively. Here is where they will share the key revelations.

Why WeWork may accept a lower valuation

WeWork’s prospectus says the company will raise $1bn in its IPO — but that is just a place holder number until it has tested out the market appetite. The expectation is that it will raise a multiple of that. In fact, the company must raise at least $3bn to unlock additional debt financing that it is pursuing at the same time.

The filing reveals that this month, WeWork signed a commitment letter for a new senior secured credit facility of up to $6bn. On the other side of the transaction are more than 10 banks, led by JPMorgan Chase, Goldman Sachs and Bank of America.

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The amount that the company raises from shareholders will depend on investor reaction to its pitch, and it will not narrow down a range for the share price until closer to the flotation date. Because of the contingent nature of the asset-backed debt financing, it is possible that WeWork will settle for a lower debut valuation in order to attract more demand for its shares.

Who owns WeWork now?

Since Adam Neumann and Miguel McKelvey founded the company in 2010, WeWork and its more recently created parent have raised almost $8.4bn. The biggest chunk of that funding came through one man: Masayoshi Son, chairman of SoftBank.

The filing does not state what percentage of the class A ordinary shares each investor owns, but it shows how large SoftBank’s looms over the current shareholder register. Entities associated with the Japanese group hold almost 114m shares, compared to 32.6m for Benchmark and Adam Neumann’s 2.4m shares.

But the IPO filing confirms that Mr Neumann will continue to control a majority of the voting rights through class B and C shares.

Unusually, the small print announces that Adam and Rebekah Neumann have pledged $1bn to fund charitable causes within 10 years of the IPO, starting with helping to conserve over 20m acres of tropical forest.

“To ensure that this is meaningful,” they say, they have agreed that the supervoting shares which cement their control of the company will only be worth 10 votes per share rather than 20 if they have not contributed the $1bn within a decade.

Burn, baby, burn

WeWork’s top line growth has come with ever increasing bottom line losses. In its filing with the SEC, it says bluntly: “We have a history of losses and, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability at a company level . . . for the foreseeable future.”

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Its full-year net losses jumped from about $900m to $1.9bn in 2018. For the six months to June 30 this year, net losses grew again, from $723m to $904m, even as revenues doubled from $764m to $1.54bn.

The outflows come from its race to open more new locations. “These expenditures will make it more difficult for us to achieve profitability, and we cannot predict whether we will achieve profitability for the foreseeable future,” it says. Losses should not increase as a percentage of revenue in the long term, it says, but they may do in the near term.

Unlike other unicorns, investors have already had a chance to take a close look at WeWork’s financials. The reason: the company last year borrowed $702m through corporate bond markets and began reporting quarterly results to its new creditors. Those bonds, which slumped after SoftBank drastically scaled back a planned investment in January, have rallied ahead of the IPO and are currently trading at 98.5 cents on the dollar.



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