August 16, 2019

WeWork’s Proposed IPO: The Latest Unicorn Doesn’t Disappoint. . .

Around here, we’ve come to expect big things from unicorn IPO filings – and I’m delighted to say that ’The We Company’’s Form S-1 does not disappoint. I’ll let others comment on the company’s decision to use an Up-C structure, its financial performance & its corporate governance.  I’m just going to let the document speak for itself. I’m sure the lawyers involved spent lots of time toning this thing down from what the business folks wanted – but in the end, “unicorns gonna unicorn.”  Here’s the paragraph that leads off the “Prospectus Summary”:

We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness. We have built a worldwide platform that supports growth, shared experiences and true success. We provide our members with flexible access to beautiful spaces, a culture of inclusivity and the energy of an inspired community, all connected by our extensive technology infrastructure. We believe our company has the power to elevate how people work, live and grow.

My oldest son works for a startup in Chicago that’s housed in a WeWork space, but I haven’t seen any evidence of elevated consciousness in him. I don’t think they have free beer – or as page 145 of the prospectus refers to it, “Craft on Draft” – in the Chicago locations anymore, so maybe that’s what’s missing. Anyway, the company’s mission statement may sound goofy to a middle-aged guy like me, but management wants everybody to know they’re serious – so they put it in the “Risk Factors” section:

We may make decisions consistent with our mission that may reduce our short- or medium-term operating results.

Our mission is integral to everything we do, and many of our strategic and investment decisions are geared toward improving the experience of our members and the attractiveness of our community. While we believe that pursuing these goals will produce benefits to our business in the long-term, these decisions may adversely impact our short- or medium-term operating results and the long-term benefits that we expect to result from these initiatives may not materialize within the timeframe we expect or at all, which could harm our business and financial results.

Given how much media attention has been devoted to this offering, it’s no surprise that there’s also a gun-jumping risk factor on page 49.  Apparently, it relates to comments that CEO Adam Neumann & CFO Artie Minson made to Axios & Business Insider back in May. Hey, if you’ve got a mission to raise the world’s consciousness, you’re sort of obligated to preach your evangel whenever the opportunity presents itself, right?

Related Party Transactions:  We’ll Get to That Stuff – But First, Adam is Awesome!

I could go on like this, but I’ll do just one more –  the “Related Party Transactions” section. To soften the blow of the nearly 11 full pages of related party transactions disclosure, the section begins with a testimonial to the CEO’s overall awesomeness:

Adam has served as the Company’s Chief Executive Officer and Chairman of the Company’s board of directors since our inception. From the day he co-founded WeWork, Adam has set the Company’s vision, strategic direction and execution priorities. Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator, while thriving as a community and culture creator. Given his deep involvement in all aspects of the growth of our company, Adam’s personal dealings have evolved across a number of direct and indirect transactions and relationships with the Company. As we make the transition to a public company, we aim to provide clarity and transparency on the history of these relationships and transactions, as well as the background to the strategic governance decisions that have been made by Adam and the Company.

I’ve read this several times, and I love it more each time – especially the part about how the CEO’s “personal dealings have evolved across a number of direct and indirect transactions. . .”  Of all the unicorn disclosure I’ve ever read, this just may be the “unicorniest”!

The Weed Beat: U.S. Capital Markets More Open to Cannabis-Related Businesses

This recent blog from Duane Morris’s David Feldman reviews recent U.S. financing activities involving cannabis-related businesses, and says that they have positive implications for U.S. based-businesses:

These developments likely will lead to fewer US companies feeling the need to go public in Canada, where previously companies believed capital was easier to access. Second, the growers and sellers of cannabis in the US, those that “touch the plant,” have not yet been permitted to list their shares on a national exchange. It will be interesting to see if and when the exchanges relent on their reticence to list these now large and fast-growing entrepreneurial enterprises as the march to US legalization continues. In the meantime, capital as fuel for growth is more and more available to these US businesses.

John Jenkins