Does WeWork wobble mark end of flotation boom?

Uncertainty over property rental firm WeWork’s stock market listing, reflects a wider concern the bubble in billion-dollar venture captial start-ups could be about to burst as the global economy heads for recession.

The company had been valued at $47bn (£38bn) last year, but reports have suggested it is now considering a price tag of less than $20bn. It is said to be facing pressure from its biggest external investor, Japanese firm SoftBank, to drop its flotation plans amid concerns about its plunging valuation.

It is one of a number of “unicorn” companies which has seen its value plunge following floatation.

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Ride hailing apps Uber and Lyft have disappointed since going public while messaging app Slack has also struggled. All these companies received multi billion-dollar valuations despite failing to ever turn a profit. WeWork for example, has lost more than $4bn since 2016, burning through capital even as its revenues have doubled each year.

CEO Adam Neumann’s plans to take WeWork public have “backfired, as his company becomes the poster child for a bubble in venture capital fundraising that has pushed some start-ups to unsustainable valuations”, Reuters says.

The BBC adds that “worries over prospects for global economic growth, given factors such as the US-China trade war and the uncertainty surrounding Brexit” could spell further trouble, with some arguing that “in tighter economic circumstances, companies and consumers are likely to cut back their spending on things such as cab rides and workplace apps - not to mention spending on desk space hire”.

“They are obviously very different businesses, but the connecting thread is that they are losing money, burning cash and rely on sustaining very high growth rates over time,” says tech analyst Richard Kramer, founder of Arete Research.

“If there is anything that changed in the mood music, it is that multiple segments of the market are increasingly pricing in a recession” he added.