WeWork

WeWork faces an unlikely foe: formaldehyde

image of people
WEWORK

The shared workspace giant WeWork has been looking for a financial lifeline after its plans for an flotation had to be abandoned. But it now faces a new noxious problem that is proving to be costly.

It had to close some 2,300 phone booths at more than 220 sites in the US and Canada after elevated levels of formaldehyde were detected.

In 1987, the US Environmental Protection Agency classified the substance as a probable human carcinogen under conditions of unusually high or prolonged exposure. Phone booths are scattered around WeWork locations and provide a private space for tenants to make phone calls.

“The safety and well-being of our members is our top priority, and we are working to remedy this situation as quickly as possible,” a WeWork spokesperson said in a statement.

SoftBank 'to take control' of WeWork

office
WEWORK

There are a number of reports about WeWork, the office space company.

SoftBank - which already owns around 30% WeWork shares - is reported to be talks to take control the company, taking a possible 50% stake.

The Financial Times said that SoftBank’s chief executive Masayoshi Son has been trying to gain full control of the company in an effort to salvage an investment that has already cost the Japanese telecom group and its Saudi Arabia-backed Vision Fund more than $10bn.

A company spokesman told the FT: "WeWork has retained a major Wall Street financial institution to arrange a financing. Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”

WeWork chases new financing - report

WeWork offices
Getty Images

Fresh from pulling its flotation, managed office firm WeWork is racing to raise new funding, according to the Financial Times.

The newspaper says WeWork is "scrambling" to secure new debt financing to buy time in order to complete a restructure of the business.

It had hoped to raise money through the flotation but its share offering sparked little enthusiasm from investors.

It is quite a change in fortunes for a business that was valued at $47bn only 10 months ago.

'The business of the future'

Today Programme

BBC Radio 4

WeWork
WeWork

Shared office space rental provider WeWork recently decided against floating its shares on the stock market.

The move came after the property company's offering in August sparked little enthusiasm from investors, who had questioned the firm's finances, governance and leadership.

Despite this, Mark Dixon, chief executive of rival IWG, formally known as Regus, says the business model has a big future.

"This is the business of the future. Every office wants to outsource."

Mr Dixon says IWG benefitted from the money WeWork put into the industry as it raised overall awareness of the sector.

He says around 60% of the firm's revenues come from mid-sized to large corporations as "more and more companies completely change over to flexible working."

Firms are increasingly "providing a place close to where they (workers) live", rather than requiring them to come into a central head office, he says.

WeWork postpones IPO

Workers
WeWork

WeWork has confirmed it will scrap its planned IPO.

Co-CEOs Artie Minson and Sebastian Gunningham said: “We have decided to postpone our IPO to focus on our core business, the fundamentals of which remain strong.

"We have every intention to operate WeWork as a public company and look forward to revisiting the public equity markets in the future.”

Last week ,WeWork announced that its founder would step down as chief executive and relinquish control over the company, after the firm's plans to sell shares publicly ran into trouble.

How WeWork compares to other Silicon Valley firms

Today Programme

BBC Radio 4

WeWork's chief executive Adam Neumann
Getty Images
WeWork's chief executive Adam Neumann

So if Uber is failing next to Amazon, then what does that make office property rental firm WeWork, which has seen its valuation plunge in recent months?

"If there's such a thing, WeWork would be a more extreme version of Uber, than Uber. It is losing more money, it has a worse business model, that's based on short-term loans and real estate - things that could fluctuate at any moment," Sarah Lacy, founder and editor-in-chief of the tech news website Pando told Today.

She added that WeWork is more commonly mentioned in the media for having issues with how it is run, than for anything else, which is a red flag, and that WeWork's corporate governance is "even worse" than Uber's.

In her mind, WeWork's chief executive Adam Neumann can't continue to control the board, if the firm wishes to have any chance of going public successfully.

"The company's future financing is dependent on going public this year. It has to go public this year," she said.

"What's the one dramatic thing that can change this year? That's the founder leaving the company."