Alex Newman | Sep 09, 2019 10:16AM ET
The past few years have borne witness to a staggering rise in so-called “co-working,” or the process of sharing a single workspace with multiple independent people who may be employed by different companies or freelancers. WeWork, a company focused on providing shared workspaces to facilitate the rise of co-working, has helped propel the trend forward by making it easy for freelancers and entrepreneurs to obtain cheap workspaces wherein they can collaborate with other creative types.
Now, WeWork is heading for a tumultuous market debut that’s likely going to be defined by the company’s ever-ballooning debt. Here’s what to expect from WeWork as it forays into the open market.
WeWork has one thing going for it ahead of its IPO; shared workspaces are truly taking off, with the American workforce having slowly but surely embraced the trend of sharing your office with others who may not be working on similar projects. In some cases, employees are making the best of it in shared workspaces that are populated by professionals who work for other companies. As this trend has unfolded, WeWork has stood to benefit from this new way of doing business, growing at a staggeringly rapid pace and accruing more than a little debt along the way. According to exchange for indebting itself, the company has yet to display whether it can become profitable for good.
If WeWork can continue to dominate the commercial leasing market, investors may be convinced to stand behind the company despite the mounting losses that it’s been posting in recent years. After all, there’s a tremendous amount of potential in being the market leader when it comes to office real estate in the forthcoming future, especially since the gig economy is still growing and forcing businesses to rent out workspaces when they may otherwise purchase long-term office real estate. WeWork’s revenue from office locations isn’t entirely as robust as it may seem, however; the company has to spend huge sums of money paying off landlords while repairing and cleaning offices everywhere, for instance, demonstrating that it will be grappling with huge costs for the foreseeable future.
One major fear that investors are nursing is how the company will perform in the wake of a recession. With economic analysts and political pundits musing that the ongoing trade dispute is likely slowing down but not yet over, some investors will be worried that WeWork won’t make good use of the funds they throw at it. The company’s S-1 claims that it’s ready for a recession , however, and WeWork seems to think that betting on offices will continue to pay off as time goes on. Nevertheless, WeWork’s massive amount of debt and inability to turn its office leases into a sustainable cash cow should worry those who have cold feet about investing in the company. The gig economy may be growing, and shared workspaces may be popular, but WeWork has yet to prove that it can actually earn a buck by mastering the commercial leasing market.
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