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Two years after WeWork’s attempt to become a public company flamed out spectacularly, the co-working giant will start trading on the stock market on Thursday, hoping that investors will now believe in its prospects.
The earlier effort collided with concerns about WeWork’s breakneck growth, its huge losses and the alarming management style of its co-founder Adam Neumann. WeWork has new leaders who have pared back its expenses and hope to exploit an office space market that has been upended by the pandemic. But the company still has lofty growth targets, big losses and many empty desks in its 762 locations around the world.
“We are the right company, at the right time,” Sandeep Mathrani, WeWork’s chief executive, told investors this month. “I joined this company with an upside-down cost structure. Over the past 20 months, we have focused on streamlining our operating expenses and right-sizing our real estate portfolio.”
Instead of an initial public offering, WeWork is entering the public markets by merging with a special-purpose acquisition company, or SPAC, something of a craze these days, and will trade under the ticker WE. It is expected to raise as much as $1.3 billion from the deal, a sum that includes stakes held by the investment firms BlackRock and Fidelity. Ahead of Thursday’s listing, WeWork said it was worth nearly $8 billion, a fraction of the $47 billion valuation placed on the company before investors soured on it in 2019.
WeWork leases office space and charges membership fees to customers — including freelancers, start-ups and small and large businesses — to use it. Its business rests on the belief that people might prefer the flexibility of such an arrangement over a traditional office lease, which can last for years and have other burdensome conditions.
Though flexible office space was not new, WeWork said its business could not only revolutionize how people worked, but also change how people lived and thought. Mr. Neumann attracted billions of dollars in investments, with the biggest coming from SoftBank, the Japanese conglomerate that ended up bailing out WeWork when it withdrew the 2019 I.P.O. and was in danger of bankruptcy.
Investors in WeWork must judge whether SoftBank will use any increase in the stock price to sell some of its 61 percent stake.
SoftBank may be eager to recoup the $16 billion it has sunk into WeWork, a sum that combines nearly $11 billion of equity investments, $5 billion of debt financing and payments to Mr. Neumann.
“I made a wrong decision,” Masayoshi Son, SoftBank’s chief executive, said last year. “I didn’t look at WeWork right.” SoftBank has agreed to cap its voting power in the company below 50 percent.
The pandemic, which emptied office towers around the world, also crushed WeWork’s business.
Traditional landlords survived because tenants were legally obliged to keep paying their yearslong leases, most of which remain in effect. But WeWork’s customers were able to cancel their much shorter-term agreements as they expired. WeWork’s revenue in the second quarter of this year was $593 million, well below the $988 million in revenue it reported for the first quarter of 2020, its peak quarter.
And this partly explains why the company is using up cash rather than generating it. In the first half of this year, WeWork consumed $1.31 billion of cash running its operations and purchasing property and equipment, more than the $1.15 billion in the same period of 2020.
Still, WeWork has made strides in cutting its operating expenses. Some of the biggest savings come from renegotiating leases with landlords or getting out of them. “We have exited over 150 full leases and executed 350 lease amendments year to date,” Mr. Mathrani told investors this month. “This has contributed to a significant decrease in our rent and tenancy costs, a savings of about $400 million annually.”
Tesla made $1.6 billion in the three months ending in September, the second quarter in a row that its profit has exceeded the billion-dollar mark.
The bottom-line figure exceeded the $1.1 billion it made in the second quarter and was nearly five times its profit from the third quarter of 2020.
The automaker reported a big jump in revenue, to $13.8 billion from $8.8 billion a year ago, as sales of the Model Y continued to rise in the United States, China and Europe. The company delivered 241,000 cars to customers in the quarter, up from 140,000 a year ago.
Electric vehicle “demand continues to go through a structural shift,” the company said in a statement. “We believe the more vehicles we have on the road, the more Tesla owners are able to spread the word about the benefits of E.V.s.”
Tesla repeated a previous forecast that sales would grow about 50 percent per year on average for the next few years, but the company cautioned that “semiconductor shortages, congestion at ports and rolling blackouts have been impacting our ability to keep factories running at full speed.”
The company said it expected to begin production of the Model Y at new factories near Berlin and Austin, Texas, before the end of the year. “The pace of the respective production ramps will be influenced by the successful introduction of many new product and manufacturing technologies in new locations, ongoing supply chain-related challenges and regional permitting,” Tesla said.
In an important shift, the company said it would start using lithium iron phosphate batteries for all but its long-range cars. Those types of batteries, which are popular in China, tend to be cheaper because they do not use cobalt, an expensive mineral that is primarily mined in the Democratic Republic of Congo. Lithium iron phosphate batteries can store less energy than the lithium ion batteries that Tesla had been using in most of its cars.
A portion of Tesla’s profit comes from selling regulatory credits to automakers that need them to meet emission standards. Tesla reported $279 million in sales of such credits in the third quarter, compared with $397 million in the third quarter of 2020.
The strong earnings report indicates consumers are still flocking to Tesla even as the company faces questions about the safety of its Autopilot driver-assist system and as established automakers roll out electric cars and trucks.
Autopilot, a computerized system that uses cameras and other sensors to steer, brake and accelerate cars on its own, is the subject of an investigation by the National Highway Traffic Safety Administration, the top federal auto-safety regulator. The agency is looking into whether Autopilot fails to see parked police cars and other emergency vehicles with flashing lights. The agency has identified 12 accidents in which Teslas operating in Autopilot mode crashed into emergency vehicles.
Tesla recently sent a software update to Autopilot-equipped cars that was supposed to improve detection of emergency vehicles. The traffic safety agency asked Tesla to provide extensive data about the fix and to explain why it did not initiate a safety recall before distributing the update.
The traffic safety agency had come under criticism for a lax approach to regulating new technologies like Autopilot and self-driving cars. On Tuesday, the Biden administration appointed Mary Cummings, a Duke University expert in self-driving technology, to a senior auto-safety post at the federal agency, signaling that Tesla may now face tougher scrutiny.
Ms. Cummings has criticized Autopilot, noting the system does not effectively monitor drivers to make sure they are paying attention to the road. In a message posted on Twitter, Tesla’s chief executive, Elon Musk, said on Tuesday that Ms. Cummings was “extremely biased” against Tesla.
Tesla does not appear to have lost many customers to competitors. Ford Motor began selling its Mustang Mach-E, an electric sport-utility vehicle, but its sales have been modest by the standards of the Model Y because the global shortage of computer chips has disrupted production for most auto manufacturers. Rivian, a start-up considered a potential rival to Tesla, has started producing an electric pickup truck, but so far it has only delivered a small number to customers; the company won’t say how many.
Porsche, the German automaker owned by the Volkswagen Group, has made inroads against Tesla with its Taycan electric sports car. In the first three quarters of this year, Porsche has sold more than 28,000 Taycans, which starts at about $82,000, about as much as a Tesla Model S or Model X costs. By comparison, Tesla sold 13,000 S and X vehicles.
The labor force shrank in September. There were five million fewer people working than before the pandemic began, and three million fewer were looking for work.
The slow return of workers is causing headaches for the Biden administration, which has been counting on a strong economic rebound to give momentum to its political agenda, and confounding forecasters, Ben Casselman reports for The New York Times.
Conservatives have blamed generous unemployment benefits for keeping people at home, but evidence from states that ended the payments early suggests that any impact was small. Progressives say companies could find workers if they offered higher pay, but the worker shortages aren’t limited to low-wage industries.
Instead, economists point to a complex, overlapping web of factors, many of which could be slow to reverse.
The health crisis is still making it difficult or dangerous for some people to work, while savings that were built up during the pandemic have made it easier for others to turn down jobs they do not want. Psychology may also play a role: Surveys suggest that the pandemic led many people to rethink their priorities. And the glut of open jobs may be motivating some to hold out for better offers.
The net result is that, arguably for the first time in decades, workers up and down the income ladder have leverage. And they are using it to demand not just higher pay but also flexible hours, more generous benefits and better working conditions.
“It’s like the whole country is in some kind of union renegotiation,” said Betsey Stevenson, a University of Michigan economist who was an adviser to President Barack Obama. “I don’t know who’s going to win in this bargaining that’s going on right now, but right now it seems like workers have the upper hand.”
