Founded as a co-working space in Manhattan in 2010, WeWork has grown to become among the biggest corporate landlords in some cities. It now has 527,000 members in 111 cities worldwide, according to the regulatory filing by parent firm, The We Company. That's nearly double the 268,000 members it had in the prior-year period.
WeWork, whose initial public offering is expected in September, will be the latest in a string of large money-losing enterprises to test its luck on the stock market this year, following Uber and Lyft. The company's revenue has more than doubled annually over the last few years, but its losses have grown just as quickly.
In 2018, it lost $1.61 billion while bringing in $1.82 billion in revenue. Its latest filing showed the company on track for another year of impressive growth, having generated $1.54 billion in the first half of 2019. But it also lost $689.7 million in that same period.
Investors are looking for a clearer picture of how the venture capital darling plans to chart a path toward profitability, and whether WeWork's business model can withstand an economic downturn.
WeWork mostly makes money by renting buildings and dividing them into trendy office spaces that it sublets to members. But the company has branched out widely, from acquiring a marketing software company to launching a business-focused school for children and buying a large stake in a wave pool company.
It has cast itself as transformative force, changing the way people work and live. The company is one of the most highly valued privately held companies in the world, at $47 billion.
Alejandro Ortiz, principal analyst at SharesPost, said WeWork's stunning growth makes it attractive to investors, but the success of its IPO will depend on convincing investors it is more than just a landlord. So far, WeWork has mostly painted a picture of a real estate company that integrates technology into its services.
"Are they actually a tech company?" Ortiz said. "That's going to come up in the next six months, and as of now, I'm leaning toward real estate."
WeWork began by renting office space to freelancers and startups, but a growing part of its customer base are major corporations, which are betting on the model as an efficient way to enter new markets and bring employees closer to clients.
About 40% of WeWork memberships came from companies with 500 or more employees in the second quarter of 2019, up from 30% at the same time last year. Those so-called "enterprise memberships" are valuable to WeWork because they typically sign up for longer-term commitments.
Companies including UBS have contracted WeWork to redesign its existing offices spaces, giving them a hipper vibe with huge multi-functional spaces and wellness amenities. That business could ease WeWork's reliance on growing its costly real estate footprint.
But the company has at times raised questions about its direction with investments such as the children's school.
"What are they actually trying to do there?" Ortiz said. "In short, I don't know what those business lines do for the company, but I do know that building out things like that is very expensive."
In its plans to go public, WeWork outlined a number of risks. It warned that because it has been spending so heavily to grow its business, the company may be unable to achieve profitability. WeWork said it expects to expand aggressively in its existing cities and launch in up to 169 additional cities.
Other risks have to do with its unconventional CEO and co-founder, Adam Neumann, who stirred controversy with his investments in real estate entities that lease to WeWork, setting up potential conflicts of interests.
Also, Neumann has no employment contract with his company and if he ends up leaving his post as CEO, it could hurt the business because he has been critical to setting the company's vision.
The company further warned investors that Neumann gave media interviews earlier this year that potentially violated Securities and Exchange Commission protocols about respecting a "quiet period" ahead of IPOs. WeWork had filed confidentially for an IPO in December 2018.
WeWork indicated that it's organizing its shares in such a way that Neumann will control a majority of the voting power, giving him the ability to dictate the outcome of major decisions.
Benchmark, J.P Morgan and Softbank also were listed as major stockholders that own more than 5% of the company, along with WE Holdings, which is also controlled by Neumann.
Investors are often wary of companies that place so much power in the hands of one executive or founder. But defenders of the practice say it can help the company stick to its long-term vision and shield the company from the short-term goals of Wall Street.
An Israeli immigrant who partly grew up on a kibbutz, Neumann has tried to position WeWork as a trend-setter for sustainability, including banning meat at employee events.
WeWork said Neumann and his wife Rebekah agreed to contribute at least $1 billion to charity by the 10-year anniversary of the IPO, and if that contribution is not met, Neumann's shares would lose some of their voting power.
Associated Press Writer Michelle Chapman contributed to this story.
Copyright 2019 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.