WeWork IPO filing shows it's losing nearly $5,200 per customer

By Stephen Gandel

/ MoneyWatch

WeWork, the office-sharing, kegger-hosting phenomenon that has redefined the modern workspace, is also raising the bar for how much money a startup can lose and still be considered a buzzy investment.

WeWork's corporate parent, the We Company, which released its IPO documents on Wednesday, loses roughly $5,197 per customer who inhabits its office space per year. That's considerably more than newly public companies like Uber or Beyond Meat are losing on their growing customer bases.

WeWork, which says in the offering document that its corporate mission is no less than to "to elevate the world's consciousness," is on track to lose $2.7 billion this year from its operations, up from nearly $1.7 billion last year. The company's revenue in the first six months of the year nearly doubled from last year's first half, to $1.5 billion. The company said its losses rose just 10% from a year ago, but that includes a $470 million non-operating, and likely non-recurring, gain. Exclude that, and losses from the We Company, which says it will trade under the ticker symbol "WE," rose 60%.

Co-working: When the home office is away from home

Of course, it's no surprise that a startup like WeWork loses money. The company's business model has traditionally been to rent out office buildings, spend millions of dollars hipstering up the space, and then re-renting the collaboration halls to various startups for far less than they would pay elsewhere.

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What's more, among recent IPOs, WeWork's losses might seem relatively modest. Uber, for instance, lost $6.5 billion from operations in the first half of the year. WeWork's parent has $2.4 billion in cash, and its highly anticipated IPO is likely to add as much as a billion more.

And many investors also once fretted about the big losses at Amazon.com and Netflix when they went public, and both companies have turned out to be good stock investments. Seventeen years after its launch, Netflix is still losing gobs of money as it grows its subscriber base around the world.

WeWork's parent has branched out into other areas, like owning its own office space and designing space for others. Both of those businesses should be more profitable. For now, WeWork's IPO filing shows the company still makes nearly 90% of its revenue from its traditional business of selling memberships to co-work spaces.

But what is staggering about WeWork, and what could turn off investors as a major stumbling block to profitability, is how much it loses per customer. It's 24 times the amount that ride-sharing giant Uber, another recent IPO, is on track to lose per active rider this year, and nearly 129 times what struggling meal delivery service Blue Apron losses per subscriber, and nearly 753 times the $6.90 per year that popular pet e-tailer Chewy.com lose a year per regular customer.

WeWork won't pay for meat meals

Office space is more costly to provide than a single ride or a meal, with more of an ability to leverage the cost of designing a large shared office space over many customers. Even so, WeWork loses 94 cents every minute one of its members spends hunched in low-slung chairs with others over laptops, setting up slide decks in their conference rooms or mingling at WeWork's famed kegs, based on a 40-hour work week.

It's not clear yet how investors will react to WeWork's growing red ink. It does appear that investors have been somewhat skeptical of the lack of profits at a number of recent IPOs. Ride sharing companies Uber and Lyft have gotten lukewarm receptions from investors. Shares of both companies are down from where they went public.

But there is still a chance that WeWork's stock could sizzle. Beyond Meat, which loses an estimated $0.15 on every pseudo-meat patty it sells, has turned out to be a beefy investment. Its shares, even after a recent tumble, are up 568% from its May IPO.

First published on August 14, 2019 / 11:52 AM

© 2019 CBS Interactive Inc.. All Rights Reserved.

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