A Cheaper WeWork Still Looks Too Expensive, Analysts Say
A Cheaper WeWork Still Looks Too Expensive, Analysts Say
(Bloomberg) -- Even at half-off, WeWork still has plenty of bears.
At least two analysts on Thursday said a discounted IPO valuation of $20 billion to $30 billion is still too ambitious. But that’s the price WeWork may ask from IPO investors, people with knowledge of the matter told Bloomberg earlier. A recent private funding round valued the New York-based startup at roughly double that amount, $47 billion.
Triton Research Inc. CEO Rett Wallace, who last month called WeWork’s prospectus a “masterpiece of obfuscation,” agreed the lower valuation is still too expensive for his taste.
“The burden of proof is still on WeWork to explain why the equity value of a company with billions of obligations and billions of losses isn’t zero,” he said in an interview. Wallace has said that WeWork’s business model is less favorable than its ride-sharing comparables in part because of its long-term obligations to landlords. By contrast, Uber and Lyft owe no money to their drivers if customers dwindle.
The valuation that’s under consideration implies a roughly 4x 2020 revenue multiple, assuming sales keep doubling each year, according to Bloomberg Intelligence analyst Jeffrey Langbaum. That would still value WeWork at a premium to both Uber Technologies Inc. and Lyft Inc., which average 2.5x EV/2020 sales.
“To justify a premium multiple, WeWork would need to continue doubling revenue,” Langbaum wrote on Thursday. “While possible, considering its large addressable market, this would likely delay profitability and require an offset to slowing revenue per member.”
Lyft’s 2.4x multiple suggests WeWork’s enterprise value is closer to $15 billion, while Uber’s 2.8x multiple implies a $17 billion price tag, he added.
Read more: As Wall Street Waits for WeWork, Its Peers Sag: ECM Watch
The steeper discount also leaves a valuation gap with WeWork’s closest real estate competitor, IWG PLC, which trades at 1.5x revenue, Equityzen co-founder Phil Haslett said Thursday on Bloomberg Daybreak.
“I would guess they probably price this thing on the conservative end,” he said. “Maybe in the $20 billion range, given the company’s trying to raise some more money.”
To contact the reporter on this story: Drew Singer in New York at dsinger28@bloomberg.net
To contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Will Daley
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