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- WeWork released an embarrassing statement recently about the NYSE threatening to delist its stock.
- Beyond Softbank, several VCs still had large stakes including Benchmark and Insight Partners.
- If there are lessons to be learned from WeWork, there's no indication that VCs have learned them.
Last week, WeWork was forced to issue an embarrassing press release warning that it was in danger of being delisted from the NYSE because the stock has traded below $1 for so long.
In 2019, WeWork was valued at $47 billion, prior to a disastrous attempt to go public that resulted in the exodus of its flamboyant, controversial founder Adam Neumann. As of Monday, with shares trading at 47 cents and a market cap of $345.7 million, the company has lost some $46.7 billion in value over four years — vanishing like a sand sculpture left in the wind.
In 2021, the company had a moment when it looked like its fortunes could turn around. It was acquired by blank-check special purpose acquisition company, BowX, a SPAC from Vivek Ranadivé, founder of software company Tibco, but perhaps better known for his time as an owner of the Golden State Warriors and, more recently, the Sacramento Kings. WeWork's valuation at that time was $9 billion, CNBC reported.
But WeWork crawled into post-pandemic 2023 so loaded with debt that it has yet to find its footing or its future. Last month, it struck deals to restructure debt, cutting obligations by about $1.5 billion, and extending the due dates of other notes in an attempt to preserve cash, as Reuters reported. This after it closed 40 locations in late 2022.
When a $47 billion startup shrivels so drastically, who gets hurt? The investors. In this case, Softbank has suffered the most by far. It's Vision Fund is still the largest shareholder of WeWork with over 461.5 million shares, or about 62% of the company. Softbank has been in a world of hurt over WeWork, and other missteps, for years now.
Other venture capitalists are still holding the bag, too, with significant stakes in WeWork including Benchmark (which still holds over 20 million shares or nearly 3% of the company) and Insight Partners (just under 13 million shares or a bit less than 2%), according to recent regulatory filings. Then there's founder Adam Neumann, who owns over 68 million shares of common stock and also nearly 20 million (virtually all) of its Class C stock.
While WeWork puts a bit of egg on the faces of Benchmark and Insight, it is ultimately only a spec amid what is otherwise, year after year, enviable performances. For instance, Benchmark had a big stake of one of the few splashy acquisitions of last year, Amazon's $3.9 billion purchase of One Medical. And Insight is known for its investment in winners like Databricks and SentinelOne. Benchmark, Insight and Softbank did not immediately respond to a request for comment on Monday.
While it's true that Neumann's WeWork holdings are in sad shape now, he has already been redeemed Silicon Valley style. He's back with a new startup that raised $350 million from the VC giant Andreessen Horowitz in August, 2022 — its biggest check ever — and is back on the tech speaker circuit. A WeWork spokesperson declined comment but pointed to its last earnings for Q4, 2022, when it announced an 18% year-over-year increase in revenue for the quarter.
Staggering as it might seem to blow away nearly $47 billion dollars, with those kind of repercussions, WeWork isn't a warning for most of the venture capital community. It's just a stretch and a yawn.