WeWork Valuation: Giles Fuchs in CityAM's Debate

The anticipation around the September IPO of the flexible working giant WeWork has not come without its controversies, as there remains a significant debate on the valuation of the firm.

In light of this recent contention, Giles Fuchs, CEO and Co-Founder of Office Space in Town features in this morning's City AM debate - 'With its valuation looking, is WeWork's IPO a good idea?' arguing that WeWork may struggle to meet its ambitious IPO target...

Giles states:

“WeWork is planning to list as a tech company, yet it is much more similar to a real estate business. Unlike tech firms – which, after investing heavily to create their disruptive product or service, see costs fall – WeWork has to bear significant maintenance and other costs of the buildings it acquires.

WeWork is also seeking a valuation based on earnings before interest, taxes and amortisation (Ebita), yet a yield basis (typical in the property sector) would be more appropriate. 

And there is a comparator: UK-listed IWG (Regus). While IWG is profitable, has a 30-year track record, and pays dividends, WeWork is less than a decade old, has recorded consistent losses, and pays none.

If IWG were valued on a yield basis, it would probably be not far from the norm for the flexible workspace sector of around five or six per cent. Given the disparity between the two operators’ track records, it could be argued WeWork should be valued on a much higher yield, which would leave it struggling to reach its IPO valuation target. Of the two, I know which IPO I would be backing”.

You can read the full debate on pg. 17 of today's (10.09.19) edition of the city newspaper, or online here.