At a $20B valuation, is WeWork overvalued?
Well, goodness since this question was asked WeWork is now worth $20 billion! + WeWork’s $20 Billion Office Party: The Crazy Bet That Could Change How The World Does Business
Does this even make sense? WeWork is losing money, its margins are murky and it is crafting brand new financial metrics like “community adjusted EBITDA” we’ve never heard of! WeWork’s staggering growth has run up an $18 billion rent bill
Still … maybe it does make sense.
First, there’s a $3b public company comp in Regus/IWG. Regus is a slow-growing, but well established player in the market. And WeWork is growing much, much faster. So you can clearly see your way to a much higher valuation than $3b:
Secondly, the market itself is very large ($200b+) and is clearly changing. Office space is a huge market and Regus/IWC only carved out a very small space of it. WeWork by contrast is changing the way many large companies use and deploy space. Enterprises are choosing to work out of WeWorks (and at very high implicit rent rates) for the convenience and experience. $3b Regus by contrast is a niche player. WeWork is redefining at least a corner of a huge market.
Third, the brand is strong. Yes, there is plenty of competition. But WeWork has become sort of the Starbucks of Coworking. It’s no longer cool. But it’s sort of the default choice for folks that want a pseudo-premium product.
So take a $3b comp, with a new entrant growing much faster, and now these days redefining a huge market … the valuation doesn’t look so crazy. If WeWork really does become the Starbucks of office space.
Even if some of the metrics are a bit hard to fathom today.