WeWork office in Dublin

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One of the eagerly awaited stock exchange listings of the year – the IPO of the office real estate lender WeWork – is currently in question.

The uncertainty is due to the company being reportedly pressured by its largest external investor, the Japanese company SoftBank, to drop its stock market plans amid concern over the declining valuation.

The company had a value of $ 47 billion (£ 38 billion) last year, but it is reportedly under $ 20 billion in price.

Other well-known and high-loss companies, such as the Lyft and Uber Ride Hail apps and the Slack messaging app, are struggling to maintain their initial ratings.

The companies belonged to a group of much-praised "unicorns" – privately owned start-ups worth more than $ 1 billion.

The trio launched its Initial Public Offerings (IPOs) this year. But while Slack is still trading near the quoted price, both Uber and Lyft are trading much lower.

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WeWork, co-founded by its CEO Adam Neumann, has not yet made a profit

Supported by venture capital firms, which were allowed to grow at high losses, companies have been more skeptical since the listing of their shares.

So will the flotation bubble burst right away?

There are concerns about the outlook for global economic growth given factors such as the US-China trade war and Brexit uncertainty.

Some argue that in difficult economic circumstances, businesses and consumers will reduce their spending on things such as taxi rides and workstation apps – not to mention office space rental expenses.

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Tech analyst Richard Kramer, founder of Arete Research, said, "These are obviously very different companies, but the point is that they are losing money, consuming and relying on money to grow very fast over time maintain.

"If anything has changed in the mood music, then it is the case that several market segments are increasingly pricing in a recession.

"At the same time these new IPOs [Initial Public Offerings] depend on continuous sales growth to make a first profit. "

He said that Uber and Lyft used on average 30 times a year, which was not enough for companies to make a profit.

"These companies are losing money," said Kramer.

"Scaling up, ie 50 to 100 trips per active user per year, requires a much larger share of consumers' purchases, and Uber and Lyft require customers to make more and more use of these purchases, but in an economically tense situation this can to be a growth. " harder to get. "

He added that the question now posed by the markets was: are these companies "recession-proof"?


What is WeWork?

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Under the direction of the charismatic Adam Neumann, WeWork offers serviced office buildings, often for small start-up companies. Critics say it must conclude long-term contracts with landlords, while it must conclude short-term contracts with its customers, making it prone to downturns should its habit dry up.

The company has lost more than $ 4 billion in capital since 2016, although revenue has doubled each year. WeWork said in its IPO filing that it could dramatically slow its expansion if it became profitable.

In 2018, WeWork lost $ 1.9 billion on sales of $ 1.8 billion. With sales of $ 1.54 billion in the first half of 2019, another $ 904 million was lost.

So far it has not made a profit, but since the beginning of 2010 it has grown rapidly and has expanded to 528 locations in 111 cities in 29 countries.


"Longer path to profitability"

Regarding Slack, he said the workstation communications app was in an unenviable position to compete with Microsoft's offer.

"When you buy Microsoft software for your business, teams are already being built," said Kramer.

Microsoft Teams is a unified communications platform that combines workplace chat, video conferencing, file storage, and application integration.

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Traders gather for a position while they wait for Slack's shares to start trading

The teams may not yet have all the features that Slack offers, but "the purchase of Slack will become an optional extra purchase," he added.

Slack also speaks more to "start-ups who want to use new tools."

Kramer concluded, "If you look at the forecasts for all of these growth companies in the early stages of the IPO, you're assuming continued growth, but the market is now predicting a lower likelihood of uninterrupted growth and a much longer path to profitability than hopeful ones Supporters originally envisaged. "