No startup is as polarizing as WeWork, and for good reason. The company, whose relentless growth has seen it open 528 locations across 111 cities in just about nine years, has never been entirely forthcoming on exactly how the unit economics add up at its locations. And so we have had a beautiful Rorschach test for the financial class these past few years regarding the company: it’s either the greatest financial return of all time or a Ponzi scheme (and absolutely nothing in between dammit).
That ambiguity is supposed to change with the company’s S-1, where it is required by law to show a reasonably comprehensive set of numbers to investors in order to go public. Unfortunately, despite all the verbiage (“Our mission is to elevate the world’s consciousness.”) and data, we still don’t know the health of the core of the company’s business model or fully understand the risks it is undertaking.
Here are three questions that remain unanswered so far by the company’s filing.
No cohort data on contribution margin
As I pointed out a couple of months ago, the ability for investors to understand the true unit economics of WeWork’s business is critical for cutting through the debate over its financial future.
It’s not as though WeWork hasn’t tried to give us some insight in its S-1. One of WeWork’s core operating metrics is “contribution margin including non-cash GAAP straight-line lease cost” (or what I will abbreviate just this one time as CMINCGAAAPSLLC). Through this metric, the company offers us a single number into the health of its business — essentially a way for investors to understand the performance of the company’s mature office locations.