Tension between real estate start-up WeWork and its largest shareholder, SoftBank, was not a central issue in the decision to delay an initial public offering, sources told CNBC’s David Faber.
Sources told CNBC Monday that the on-again, off-again IPO was delayed this week, adding another layer to the company’s chaotic path to an IPO.
WeWork and the Japanese holding company, run by billionaire investor Masayoshi Son, had agreed to a $1 billion parallel private placement offer at the IPO price, the sources said. That would have enabled SoftBank’s warrants to be repriced to the IPO price.
It also would have left at least $2 billion on the table for WeWork to raise in the public offering. Even at that price, they were unable to find a deep enough market at a price WeWork was willing to accept, according to Faber’s sources.
The Wall Street Journal reported that WeWork is expected to wait until mid-October “at the earliest” to start its investor roadshow. The Journal also reported that the delay could last longer, and some existing investors — including SoftBank — have asked the company to wait until next year to launch its IPO.
The delay comes after valuation targets for WeWork have dropped well below its private valuation, which was by some measures was as high as $47 billion. Sources told Faber last week that the IPO valuation could fall below $15 billion, perhaps around $10 billion to $12 billion.
The company is being met with skepticism about massive losses and its path to profitability as it looks to go public. WeWork has the second deepest losses in history the year before going public, according to Renaissance Capital. Uber, another SoftBank investment, saw the biggest losses ahead of an IPO. Investors had also questioned Neumann’s control over the company.
In response to those governance concerns, WeWork ammended its S-1 filing to change its high-vote stock from 20 votes to share to 10 votes per share, which would curtail the CEO’s voting power. Before that move, he controlled the majority of voting rights. The company also eliminated a key provision that would have allowed Neumann’s wife, Rebekah, to lead the search for his successor should he ever become permanently disabled or deceased.
The filing also states that WeWork will list its shares on the Nasdaq under the ticker “WE.” The question now hangs on whether or not an additional 30 days is enough to improve investors’ outlook on what the company is worth. WeWork is set to update its S-1 filing, and according to Faber’s sources, the numbers are “quite strong.”