WeWork ($PRIVATE:WEWORK) is at a critical crossroads. The co-working startup that shook up and redefined the co-working industry is due for an IPO, which in most cases would be great news for all those involved. But in a bizarre move, WeWork co-founder Adam Neumann reportedly cashed out of more than $700 million in stock sales and loans ahead of the company's an initial public offering.
If that doesn't shake investors, international pricing data collected since May just might.
While the co-working concept is well known and relatively commonplace here in the United States, it's new to prospective customers in emerging markets. Expansion in hot startup locales like Korea, Israel, and China will be critical to WeWork's future as a public company under pressure from investors to reach new markets.
But new data we've collected shows that in those marketplaces, pricing for WeWork's entry-level hot desks is seeing a recent slump, an indicator that demand may not be as hot as hoped.
International expansion
According to documents obtained by The Financial Times, WeWork spent $2.5 billion in 2018 in order to expand its global network as it looks to attract emerging and maturing entrepreneur-friendly marketplaces.
The number of WeWork global location openings has accelerated as the company looks to get ahead of an increasingly competitive market. In Europe alone, Colliers International Group reported that the number of serviced and co-working officers across Europe increased by more than 200 percent in the past five years.
But WeWork sees opportunity in emerging markets, at least according to location data tracked over time. Behind the United States, WeWork has opened the most locations in China, the UK, and India.
The company's international hiring activity seems to back this up as well. After the United States, WeWork hiring in the past quarter was most active in London, Shanghai, and Tokyo.
But along with these openings is a curious trend: while the number of listed openings decreased in late 2018 and into early 2019, the number of listed WeWork vacancies worldwide has increased from 5,780 to 6,680. Some of this is likely due to the company simply opening more locations, but bookkeepers — and investors — always like to see inventory move quickly.
Entry-level pricing is missing its mark
If the issue is one of flat demand, one would have to look at either competition — of which there are an increasing number of actors — or a scrambling pricing model. In this case, the latter appears to be an important variable here. So as those new open spaces became available in May 2019, we gathered data to understand their pricing activity to begin to understand WeWork's potential in new marketplaces. We focused in particular on shared-workspace hot desks, WeWork's core product for entrepreneurs who may become brand advocates, as a way to gauge how the company is setting and adjusting its entry-level pricing.
In the United States, WeWork hot desk prices have been steady, with a small increase tail in the past week. WeWork's hot-desk product is well established here and has likely stabilized when it comes to pricing in the context of market demand and competition.
South Korea is quickly becoming a startup hot spot, with the Seoul government taking an active role in investment and favorable laws. It makes sense, then, that WeWork would be looking to attract new customers in the country. Despite Seoul being a logical place to launch WeWork spaces, pricing in the area has seen a dip adjustment as of late.
Venture-backed financing for advanced technology startups in Israel grew 223% in the past five years, which puts it third behind only the US and China. But, like South Korea, WeWork pricing for hot desks is apparently still seeking its mark.
Across Europe, hot desk prices are seeing a similar, worrying trend. Since May, average hot desk prices have been on a downslope, with another downward adjustment just this week.
Stability in mature markets
In the UK, however, hot desk prices have been steady, with an increase tail reminiscent of that in the United States.
In China, too, hot desk prices have been steady in the past quarter, as that marketplace reaches beyond maturity and price stabilization.
