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Asked a question 4 years ago

What we are the reason behind the valuation crash of WeWork?

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WeWork is an American startup. It is similar to a co-working startup, i.e., the company which provides you a shared workplace to start your startup at a very low cost.


If you want to know about co-working space then you can check this link:


WeWork was one of the most valuable American startup, whose valuation, once valued at $47 billion. But on filing for the IPO, the company was valued on papers for just $7 billion. This was a massive crash in the valuation of the company. This is the first company who got crashed in its valuation. The investor of the company( i.e., Softbank )  is now trying to take the control over the company by buying the max. no. of shares of the company. Softbank has invested $13 billion in this startup and thinking to invest around $8 billion more for taking complete control over the company.

There were mainly 3 problems that led to this crash in the valuation of WeWork. They are:

1) No personal assets

The startup was not having any property or any land asset. The company use to take the big building on the lease for around 10-15 years. The then use to renovate to the whole building by their own cost. The company was not having the full occupancy, but they had to pay the full rent of that property. Also, this was a well-known fact that at the time of re-session, the company will not This able to get customers, but they have to pay the rent of the property. This was one of the main reason that the company was not able to convince about the $47 billion valuation at the time of filing the IPO.

2) Leadership problem

The founder of the company, Mr. Adam Neumann, was not using the funded money on the startup, whereas using it on himself by purchasing the private plane, houses for himself. The first part of the company name, i.e. { we }, was also acquired by Adam himself, which he sold to his own startup for some million dollars. This was not the way to spend all the funded money on himself rather than on his startup. This thing was also not liked by the investors.

3) Wrong investments

The founder was investing money in other startups—these startups we're not having any connection with WeWork. The founder did not have any vision to expand the startup by investing money in the startups, which he can acquire after some time. This also leads to the cash crunch in the startup.



WeWork's founder, Mr. Adam Neumann, was having a good startup idea that which be successful under his presence but, due to fulfilling his own dreams with the help of the investor's money, he was not able to accelerate his company. Due to this, the startup, which was having a great valuation, crashed at the time of filing its IPO. 
Due to all these reasons, the investor of the company, i.e., Softbank, is now trying to take the control over the company by buying the max. no. of shares of the company.


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