It is really difficult to see how WeWork will ever be profitable

Monday - 26/08/2019 11:54
Adam Neumann, CEO of WeWork. Reuters
Adam Neumann, CEO of WeWork. Reuters
While those losses are smaller than its official net losses, they too are growing over time — a bad sign.

This is the chart that WeWork created to convince investors that it will be profitable in the future. It shows that in the early days of a lease, expenses will outrun revenue, leaving the lease running at a loss for several months. Only in the future, months after the location opens, does the revenue from WeWork clients make the lease look profitable. 
 

WeWork
The We Company 


But WeWork's financials don't show a pattern like this emerging in its overall business. Rather, as the company's revenue grows, so do its losses — and its astronomical future lease commitments. 

Growing revenue, and growing losses 

Normally, when a tech startup files for an initial public offering, investors look to see if there's growing revenue. WeWork definitely has that. 

In the short term, profit is not as important. As long as a company's losses appear to be declining over time, or declining as a percentage of revenue, then it is reasonable to conclude that the company is investing in its business and has a future "path to profitability," as the cliché goes. 

But that is not what is happening at The We Company, WeWork's parent. 

This chart shows the company's revenue in blue, by quarter. In the second quarter of 2019, WeWork had $807 million in revenue. Like any good IPO candidate, WeWork's revenue is rising over time. In general, this is a good sign.

Read More (...https://www.businessinsider.com/can-wework-be-profitable-ipo-financials-2019-8)

Total notes of this article: 0 in 0 rating

Click on stars to rate this article

  Reader Comments

In Case You Missed it

Advertisement

You did not use the site, Click here to remain logged. Timeout: 60 second