The co-working company WeWork, is not deemed a run of the mill real estate company, instead, in an article by the New York Times, CEO and cofounder Adam Neumann states that it’s a “community” and a “state of consciousness,” bringing people together to “change the world.”
So far investors seem to share in the company's image and/or vision: They think Neumann’s "idea" is worth $20 billion at the very least, and maybe as much as $40 billion.
But for all Neumann’s ambition to expand beyond co-working and into housing, education, and more, WeWork’s core real estate business remains its primary source of revenue. The company charges a monthly fee for access to a desk or dedicated office, and it currently boasts 256,000 customers, or “members.” In the first quarter of this year, those members generated $342 million in revenue, double last year.
That pace of growth sets WeWork apart from established office providers like IWG and Regus. But is it enough to justify a valuation of $20 billion, or $40 billion?
Not in the slightest, according to an analysis by the Financial Times. Compare WeWork’s revenue to those competitors, applying the same multiple, and Neumann’s company is worth $3 billion, tops. Even compared to a startup unicorn like Airbnb, the FT argues, WeWork’s value appears inflated, based on sales.
Put another way, anyone willing to invest in WeWork at a $40 billion valuation would have to believe that each of the company’s members is worth $156,250. Regus members, by contrast, are worth around $11,300.
Read more here.
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