Axios Pro Rata

A green watering can with a dollar sign painted on it.

August 14, 2019

Top of the Morning

Illustration: Rebecca Zisser/Axios

Co-working space giant WeWork filed for its IPO this morning, with a $1 billion cover price that's expected to at least triple. It also disclosed plans to secure a $6 billion credit facility concurrent with the offering, thus perhaps convincing some skeptical investors to swim past WeWork's sea of red ink.

  • No exchange was listed, although the company's ticker symbol will be "WE."
  • It also plans to have three classes of stock.

$904 million net loss on around $1.5 billion in revenue for the first half of 2019.

  • Operating loss and revenue both doubled year-over-year.
  • Net loss only climbed 25% year-over-year, related largely to $470 million of interest income (vs. a $46m charge in the first half of 2018). Not yet sure from where the $470 million is derived.
  • There is zero mention of "community-adjusted EBITDA."
  • Cash on hand was $2.47 billion.
  • $4 billion revenue backlog through the end of Q2, up from $2.6 billion at the end of 2018. These relate to "non-cancelable contractual commitments."

WeWork reports 527,000 members, up from 268,000 at the end of June 2018 and 401,000 at the end of December 2018.

  • 40% of its members are considered enterprise customers, thus helping fight a narrative about WeWork being reliant on tech startups.
  • It has 528 locations in 111 cities in 29 countries.

CEO Adam Neumann may be one of just three co-founders, but he controls the shares and the votes. He also didn't take a salary last year and agreed to lock up his shares for a year after the offering.

  • Newmann also pledges (along with wife Rebekah) to donate at least $1 billion to charitable causes by the IPO's 10-year anniversary. If it doesn't happen, his voting rights get slashed.
  • As a New York tech CEO emailed me after reading the S-1: "This is a one-man show and that’s the biggest unstated risk in the whole thing."

Neumann sat down with me at WeWork headquarters, one day before Uber's IPO, for an interview that Axios published here. That interview, plus a similar one with Business Insider, are listed as potential risk factors in the S-1.

  • WeWork says it doesn't believe that its participation in those interviews represents a Securities Act violation, and would "vigorously" contest any such claims. But, were a court to disagree, WeWork "could be required to repurchase the shares sold to purchasers in this offering."

WeWork has raised over $8 billion in venture capital since its 2010 founding, including an infusion earlier this year from SoftBank at a $42 billion valuation.

  • SoftBank is the company's largest outside shareholder, followed by Benchmark and J.P. Morgan.

IWG, the London-listed company that operates Regus co-working facilities, reported around $1.57 billion in first-half 2019 revenue.

  • Plus it has profits.
  • On the other hand, year-over-year revenue growth was only 13%.
  • IWG's market cap is around $4.5 billion, with an enterprise value of $12 billion.
Bottom line

WeWork will be the most polarizing IPO of 2019, and that's saying something in a year that already saw Uber and Lyft.


Canada Blame GIF - Find & Share on GIPHY
Source: Giphy

Brookfield Business Partners (NYSE: BBU) agreed to buy a 57% stake in the listed Canadian unit of insurer Genworth Financial (NYSE: GNW) for C$2.4 billion, or C$48.86 per share (5.1% premium over yesterday's closing price).

  • Why it's the BFD: Because it's been nearly three years since Genworth agreed to be taken over by China Oceanwide Holdings, but Canadian regulators have been unwilling to sign off. This divestiture should let Genworth jump that hurdle.
  • Bottom line: "The sale of the Canadian subsidiary comes at a sensitive time for Canadian-Chinese relations. The government is currently studying whether to ban Huawei from its 5G networks. U.S. charges late last year against the Chinese telco saw its CFO detained in Vancouver... Since then, Beijing has detained two Canadians, halted imports of canola and is now turning away meat shipments from Canada." Bloomberg

Venture Capital Deals

🚑 Landos Biopharma, a Blacksburg, Va.-based biotech focused on autoimmune diseases like IBD, raised $60 million in Series B funding from RTW Investments, Osage University Partners, PBM Capital, and Perceptive Advisors.

Cinq Music, a Los Angeles-based music rights management startup, raised $40 million in Series C funding from GoDigital Media Group.

Clumio, a San Jose, Calif.-based provider of enterprise data backup solutions, disclosed a $40 million Series B round raised late last year from firms like Sutter Hill Ventures and Index Ventures.

Kobo360, a Nigerian freight logistics startup, raised $20 million in Series A funding led by Goldman Sachs.

Dostavista, a Russia-based same-day “crowdsourced” delivery service, raised $15 million in Series B funding. Vostok New Ventures led, and was joined by return backers Flashpoint and Addventure.

Kasten, a Los Altos, Calif-based cloud-native data management startup, raised $14 million in Series A funding led by Insight Partners.

OpenSpace, a San Francisco-based construction tech imaging startup, raised $14 million in Series A funding. Lux Capital led, and was joined by Goldcrest Capital, JLL Spark, Navitas Capital, Suffolk Construction, Tishman Speyer, WeWork, and Zigg Capital.

Properly, a Toronto-based residential real estate buying and selling platform, raised C$12 million co-led by Prudence Holdings and FJ Labs. It also secured a C$10 million debt facility.

Systum, a Plano, Texas-based provider of wholesale inventory management software for SMEs, raised $10.7 million led by Octopus Ventures.

Secretlab, a Singapore-based maker of chairs for e-gamers, raised an undisclosed amount of funding from Temasek.

Private Equity Deals

Battery Ventures acquired and plans to merge two companies: Forest2Market, a Charlotte-based provider of data and analytics to the global forest products industry, and Fisher International, a South Norwalk, Conn.-based provider of strategy consulting to the pulp and paper market.

BC Partners agreed to buy New York-based IT services company Presidio (Nasdaq: PSDO) for $2 billion, or $16 per share (21.3% premium to yesterday’s closing price).

Brookfield Asset Management agreed to buy Australian retirement home operator Aveo Group (ASX: AOG) for A1.27 billion.

Castle Harlan and Branford Castle Partners acquired Sunless, a maker of spray tanning equipment and accessories.

🚑 Equistone agreed to buy a majority stake in Omnicare, a German pharma wholesaler.

Metco Landscape, a Denver-based portfolio company of Westhook Capital, acquired PGM, a Colorado Springs-based provider of commercial landscape maintenance services.

Nuvei, a Montreal-based payment tech company owned by Novacap, acquired SafeCharge International (AIM: SCH), an Israel-based provider of omni-channel payments services, for US$889 million.

Pexco, a Johns Creek, Ga.-based portfolio company of AEA Investors, acquired HPE Extrusion Solutions, a Bally, Penn.-based manufacturer of custom profile, tube, and rod extrusions.

Liquidity Events

🚑 AtriCure (Nasdaq: ATRC) agreed to buy SentreHeart, a Redwood City, Calif.-based maker of left atrial appendage closure devices, for upwards of $300 million in cash and stock. SentreHeart raised nearly $80 million from firms like Deerfield Management, Prospect Venture Partners, USVP, Decheng Capital, and Vivo Capital.

Bernhard Capital Partners sold Atlas Technical Consultants, an Austin, Texas-based engineering services firm, to a SPAC called Boxwood Merger Corp. (Nasdaq: BWMC).

Roark Capital is considering a sale of automotive services franchiser Driven Brands for upwards of $2 billion, per Bloomberg.

More M&A

Anbang Insurance Group is seeking a buyer for its $2.4 billion Japan property portfolio, which is primarily residential, with former owner The Blackstone Group expressing interest, per Reuters.

Cocokara Fine (Tokyo: 3098) is in talks to merge with MatsumotoKiyoshi (Tokyo: 3088) in order to create Japan’s largest discount pharmacy chain, per Nikkei.

Formant, a San Francisco-based provider of robot fleet management software, acquired Pittsburgh-based robot teleoperation company Formation. Formant last year raised $6 million in Series A funding led by SignalFire.

Joe Roth, a Hollywood producer, sold his minority stake in the Seattle Sounders soccer club to an investor group that includes Microsoft execs Satya Nadella and Amy Hood, plus quarterback Russell Wilson, and musicians Ciara and Macklemore.

Third Point, the hedge fund led by Dan Loeb, slightly cut its stake in United Technologies (NYSE: UTX) from to , after publicly opposing its proposed merger with Raytheon (NYSE: RTN).


Brick & Mortar Ventures, a San Francisco-based VC firm focused on construction tech, raised $97.2 million for its debut fund.

🚑 Great Point Partners, a growth buyout shop focused on healthcare, raised $306 million for its third fund.

It's Personnel

Romain Lanier joined Perella Weinberg Partners as a London-based managing director focused on financial restructurings. He previously was with PJT Partners.

Final Numbers

Data: Yahoo Finance; Chart: Andrew Witherspoon/Axios
Data: Yahoo Finance; Chart: Andrew Witherspoon/Axios

CBS and Viacom formally announced their merger yesterday, creating a media giant with more than $28 billion in annual revenue.

  • Why it matters, per Axios' Sara Fischer: The deal will bring together Viacom's nearly two dozen cable channels with CBS' flagship broadcast network and its premium cable network, Showtime. The combined scale from the merger will help the new company broker stronger distribution deals with Pay-TV providers and allow it to better compete for audience attention and ad dollars.
  • Go deeper: Terms of the latest media mega-merger

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🎧 Yesterday I sat in on TechCrunch's Equity podcast, hosted by Alex Wilhelm and Kate Clark, to talk everything from WeWork to Tumblr to Axios. Listen here.