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Rekenthaler Report

The Capital Markets (We)Work

In a healthy financial system, some IPOs will fail.

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Shaky Figures
Founded in 2010, the privately held company WeWork has received more than $10 billion in financing. Its January 2019 investment round, from Japanese giant Softbank (SFTBF) (which also bought into Morningstar (MORN) back in the day), valued the company at $47 billion. Several months later, WeWork filed with the SEC for an initial public offering. That planned IPO collapsed, spectacularly. Many observers now predict the company's bankruptcy.

The concern with WeWork is that while it has gathered plenty of customers, recording $1.5 billion in revenue during the first half of this year, the company has been deeply unprofitable. As WeWork's revenues jumped from $500 million in 2016 to $900 million in 2017, and then to $1.8 billion last year, its operating losses grew proportionately. WeWork predicts that it will lose $2.5 billion in 2019.

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John Rekenthaler has a position in the following securities mentioned above: MORN. Find out about Morningstar’s editorial policies.