By Joshua Franklin and Anirban Sen
Sept 16 (Reuters) - WeWork owner The We Company haspostponed its initial public offering (IPO), walking away frompreparations to launch it this month after a lacklustre responsefrom investors to its plans.
The U.S. office-sharing startup was getting ready to launchan investor road show for its IPO this week before making thelast-minute decision on Monday to stand down, people familiarwith the matter said.
The company has been under pressure to proceed with thestock market flotation to secure funding for its operations.
In the run-up to the launch of its IPO, We Company has facedconcerns about its corporate governance standards, as well asthe sustainability of its business model, which relies on a mixof long-term liabilities and short-term revenue, and how such amodel would weather an economic downturn.
Reuters reported last week that We Company might seek avaluation in its IPO of between $10 billion and $12 billion, adramatic discount to the $47 billion valuation it achieved inJanuary.
"The We Company is looking forward to our upcoming IPO,which we expect to be completed by the end of the year. We wantto thank all of our employees, members and partners for theirongoing commitment," the company said in a short statement.
Were We Company to have pressed on with the IPO at such alow valuation, it would have represented a major turning pointin the growth over the last decade of the venture capitalindustry, which has led to the rise of startups such as UberTechnologies Inc, Snap Inc and Airbnb Inc.
It would have meant that We Company would be valued at lessthan the $12.8 billion in equity it has raised since it wasfounded in 2010, according to data provider Crunchbase. And itwould have been a blow to its biggest backer, Japan's SoftBankGroup Corp, at a time when it is trying to amass $108billion from investors for its second Vision Fund.
SoftBank was discussing supporting the IPO by snapping upshares worth between $750 million and $1 billion, the sourcessaid. However, We Company decided on Monday that even withSoftBank's support, the IPO would have raised a little over than$2 billion, short of its target of at least $3 billion.
This target is tied to a $6 billion credit line We Companysecured from banks last month, that calls for an IPO to takeplace by the end of the year and raise at least $3 billion, oneof the sources said.
Were the New York-based company to fail to meet this targetby the end of the year, it would need to secure alternativefunding.
The Wall Street Journal first reported on the potential IPOdelay.
The sources who spoke to Reuters requested anonymity becausethe matter is confidential.
The last time SoftBank invested in We Company was in Januaryat the $47 billion valuation, injecting $2 billion of cash. Ithad been pushing the company to delay its IPO.
JPMorgan Chase & Co and Goldman Sachs Group Inchad been tasked with leading We Company's IPO asunderwriters.
GOVERNANCE CHANGES
We Company's decision to delay its IPO indicates it did notfeel confident that the corporate governance changes it unveiledon Friday, slightly loosening CEO and co-founder Adam Neumann'sgrip on the company, was enough to woo investors concerned aboutits lack of a path to profitability.
We Company had said it was making the changes "in responseto market feedback". It said Neumann's superior voting shareswill decrease to 10 votes per share from 20, though he willretain majority control of the company.
Neumann will also give the company any profit he receivesfrom real estate deals he has entered in to with We Company. Hewill also limit his ability to sell shares in the second andthird years after the IPO to no more than 10% of his stock.
No member of Neumann's family will be on the company's boardand any successor will be selected by the board, scrapping aplan for his wife and co-founder, Rebekah Neumann, to help pickthe successor.
The WeWork brand is strongly tied to Neumann, a freewheeling40-year-old Israeli-born entrepreneur who has said that WeCompany's mission is "to elevate the world's consciousness".
Rebekah Neumann serves as the chief brand officer.
(Reporting by Joshua Franklin in New York and Anirban Sen inBengaluru; Additional reporting by Debroop Roy in Bengaluru;Editing by Sonya Hepinstall, Christopher Cushing and CarmelCrimmins)