WeWork’s Fizzle Bodes Ill For IPOs

From the ashes of WeWork’s failed IPO … more ashes? Perhaps so, at least for the traditional IPO model.

Other money-losing firms are seeing their stocks shudder and dive. One notable example is Peloton, whose shares debuted below the offer price and sank lower.

But not even getting out of the gate speaks to something larger. The fact that WeWork has failed to go public may mark a line in the sand, where public markets will not throw money to companies that are looking for capital and have valuations in the tens of billions of dollars.

For WeWork, of course, the filing Monday (Sept. 30) to withdraw its IPO comes amid some company-specific woes. As has been endlessly documented, backers (such as SoftBank) and would-be investors were troubled by Founder Adam Neumann’s tenure and ousted him as CEO. The business model was and has been predicated on taking on long-term lease obligations and funding them with cash flows provided by short-term leases.

Then, this week, Bloomberg reported that venture capitalists and executives from what was noted as “hundreds of private companies” met in Silicon Valley to talk about IPOs – and also to discuss alternatives to traditional IPOs such as direct listings. And in at least some instances, discussions hinged on whether financial writers can be replaced with algorithms during the process of distributing shares – and where algorithms can help make pricing more efficient.

In recent months, the direct model has been embraced by Slack and Spotify. And in in an interview with CNBC, Bill Gurley, a venture capitalist with Benchmark Capital and one of the hosts of that Silicon Valley meeting, said IPOs, as traditionally done, have “devolved.”

Gurley told CNBC that “the data of how Silicon Valley companies have been taken advantage of by this broken process, it goes back … 30 or 40 years. In the past three years, it’s gotten worse, and I think that’s because the IPO process has devolved … it used to be that the IPO process was about disseminating and marketing and selling far and wide, and it’s become a game of just hand-allocating shares to the same 10 or 15 firms.”

Perhaps WeWork will be remembered as a turning point for the sell side, looked back on with wistfulness by the underwriters.

Sizzle

Ride-hailing … internationally: Uber ponies up $3.1 billion for Dubai ride-hailing firm Careem, in a move that expands Uber’s reach. Careem has presence in 14 countries, from Pakistan to Morocco. Similar to its parent company, Careem is also working on last-mile logistics and restaurant and grocery delivery.

Rewards programs: MoneyGram boosts its loyalty program to customers in France, Italy, Germany and Spain, earning discounts for money transfers. Elsewhere, Coinbase debuts a rewards program that gives cash back on every USD stable coin saved.

Alternatives to the IPO? Perhaps WeWork’s IPO debacle has a silver lining. Airbnb is reportedly mulling a direct listing instead of a traditional IPO, joining recent adherents to that model such as Spotify and Slack.

Fizzle

Libra: Clouds darkening over the consortium behind the crypto? Visa and Mastercard are reportedly wavering on their support for the digital coin that has seen regulators increasingly voicing concerns over privacy and security.

Brick and mortar: Forever 21 files for bankruptcy, becoming the latest casualty in fast-fashion brick and mortar. The company said this past week that it will close 350 locations globally, and as many as 178 other locations could be shuttered in the U.S.

Fraudsters online: For the bad guys, digital is the way to go. Findings by the Better Business Bureau indicate that consumers are more vulnerable to fraudsters lurking on legitimate websites than they are victimized through phone calls. As many as 81 percent of those surveyed said they interacted with fraudulent pitches and 50 percent lost money.