After losing out on the chance to be top underwriter, Morgan Stanley has stepped away from any role in WeWork’s upcoming IPO.
Instead, JPMorgan Chase & Co. holds the lead role on the IPO and debt financing. As Bloomberg reported, underwriters could potentially split more than $122 million in fees on the IPO alone — that’s if WeWork pays the 3.5 percent that was discussed with banks this month.
But once it was passed over for the lead position, Morgan Stanley decided not to commit as much to a $6 billion credit facility, citing WeWork’s risk profile and credit requirements. While it did offer a smaller amount — as well as a commitment from its largest shareholder, Mitsubishi UFJ Financial Group — WeWork declined the offer.
Representatives for Morgan Stanley, WeWork and MUFG did not comment on the report.
The outcome is a surprise since Morgan Stanley has been courting WeWork for years. Michael Grimes, the New York-based firm’s top technology banker, met with WeWork’s Chief Executive Officer Adam Neumann about leading the IPO, but sources said that the two didn’t hit it off, which impacted the future of the partnership.
In addition, affiliates of both JPMorgan and Goldman Sachs Group are investors in WeWork, giving them an advantage.
WeWork’s IPO is expected to raise about $3.5 billion, second only this year to Uber’s $8.1 billion IPO in May. Its IPO filing showed a company that has sharp revenue growth but has losses that have been expanding at almost the same rate.
We Co. brought in revenue of $1.54 billion for the first half of 2019 but noted a $689.7 million net loss. (The firm increased its revenue more than fourfold between 2016 and 2018.)
We reportedly intends to list with the symbol of WE, and it has been valued at as much as $47 billion in private markets. It operates in 111 cities globally with 528 locations and 527,000 memberships.