The largest tenant in New York City – WeWork, with 5.2 million square feet of space – shelved its plans to go public Monday, a week after the controversial co-founder and CEO Adam Neumann was dug.
While most Wall Street savants believe WeWork's unsuccessful initial public offering was a pickup of things to come in the IPO market, the truth is that the reason for the error lies in WeWork's untested and fatal model of failure.
WeWork is not just a tenant – it is also a landlord. It typically rents large spaces, and then creates ultra-modern workspaces to rent it out on short-term leases. It also owns some of the buildings it rents out.
The WeWork idea is great for startups, people who want to have networks or even companies that want to have a flexible presence in a city without having to manage the space or tackle long-term contracts.
But too much of the WeWork space is dedicated to common areas: sofas, cubbyholes and chit-chat sites that do not generate revenue.
And there's a problem in high-rent cities like New York, London and Washington, DC, where space is high quality.
WeWork has not even experienced the down times ̵
So it's really no surprise that the IPO roadshow was not well received – especially considering that Neumann sold $ 750 million worth of shares that led to IT.
Kudos to WeWork parent We Co. to meet the need for space in the telecommunications and startup markets. But it has too many meaningful operational problems that the IPO has been a success.