The past couple of weeks have been a near constant stream of news, stories and updates about WeWork as the company struggled to regain some valuation footing on its way to an IPO.
One has to wonder about the press build-up and hype around companies like this that are on the track to an IPO. Yes, the numbers are staggering. WeWork was valued at $47 billion back in January and everyone gets excited. New investors tout the valuations and justify their investment and the fact they “got in” on the deal as the value for the company begins to climb. The excitement and hype builds and builds and everyone wants a piece of the action.
Then the reality of the business, the revenue and profits (or loss) come into full view. In WeWork’s case, the most recent revenue was reported at $1.8 billion with expenses exceeding that revenue. Not profitable.
When we look at the WeWork business in light of the Global 5000 companies, they could be classified into 2 different industry segments — one one hand, it is a real estate company. On the other, it is a business services firm offering outsourced office space not unlike any number of business services firms. Let’s look at both of these industries.
In the business services industry, there are 260 Global 5000 firms with a total of $1.5 trillion in total revenue. WeWork is classified here and ranks #184 out of the 260. This industry grew 11.8% in 2017 and 8.2% in 2018.
Looking at the Real Estate industry, we have 123 companies in the Global 5000 representing $823 billion. WeWork would be ranked #75 if they were classified in this industry. Global 5000 Real Estate companies saw revenue growth in 2017 of 7.4% followed by growth of 16.3% in 2018 — impressive!
So, while the WeWork story is news and a bit sensational and interesting to VC’s and investors, the business itself is another good sized company — but not one that is particularly outstanding compared to others in their respective industries. And, it will not be a long lasting story if the profit line doesn’t come into positive territory. A company does not last in the Global 5000 ranking without being profitable.