WeWork losing $219,000 every hour of every day
Case Study

WeWork losing $219,000 every hour of every day

Saurav Bhagat
Written by Saurav Bhagat
[email protected] | Delhi | Published on: July-05-2019 02:36 PM

Rare is the tech giant that makes money in today’s boom. And some even lose a lot. And then there’s WeWork.

WeWork, now styled as The We Company, was rapidly growing in 2018. The renowned unicorn increased its income in 2017 from $886 million to approximately $1.8 billion in 2018. However, that development stepped up with heavy losses.

source: axios.com

source: axios.com

Here are the top-line statistics on the front, showing how fast WeWork is expanding and how much the business has cost in the latest years:

  • WeWork’s 2017 revenue: $886 million
  • WeWork’s 2017 net loss: $933 million
  • WeWorks 2018 revenue: $1.82 billion (+105.4 percent)
  • WeWork’s 2018 net loss: $1.9 billion (+103.6 percent)

That works out to the net margin of -105.3 % in 2017, and -104.4% in 2018. That’s flat. So, during 2018, WeWork did not manage to significantly increase its profitability despite scaling its revenue by more than 100%.

So what we can see is not a $1 bill selling the business for $.50. Instead, WeWork has marketed them for just under $0.50 over the previous two years. It’s an excellent way to develop, but it’s a hard way to achieve profitability.

It does not seem that this pattern will shift. According to the leading analyst firm- Axios, “WeWork President and CFO Artie Minson is expecting both income and net loss numbers to continue to grow as the latter is mainly related to upfront building and long-term contract lease expenses.”

WeWork manages to fill its rooms, and nearly one-third of the seats represent more stable corporate customers. This offers some security against downturns. Since WeWork is almost filled out, it has more room to lose customers without needing to close locations if demand falls, and commercial customers are probable to be more stable in disturbed financial moments than entrepreneurs and other supporters of shared use.

The co-working space operator continues to push toward an IPO, but has plenty of cash if it wants to wait longer.

That’s about where the good news ends. If WeWork can slow its build-out and cut cost expansion, perhaps the firm can grow into its extant cost structure. That would dampen unprofitability. But WeWork can scarcely afford to stop growing, as its sky-high valuation is tied to revenue growth. (The more unprofitable a company is, the faster it has to grow to keep investors content).

And that growth will engender more losses. So we’re definitely not looking at WeWork before it changes its tune, we’re looking at the decacorn mid-tune.

About the author

Saurav Bhagat

Saurav Bhagat

Saurav is inclined towards brands and brand story-telling from the past half a decade. His interest in startups has made him an immense member of the NBB Family from its very early days.
Saurav loves Chai and writes his day to day experiences on Quora too.
He believes in the power of storytelling for a Brand and also in general.
He often says- "Stories are powerful enough to build and erase empires and generations!"

09654178839 | A-73, Hackerspace, Noida sector- 2 Noida UP 201301

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