Co-working company We Co.—better known as WeWork—is, to put it mildly, in over its head. But it won’t be alone in reaping what it sowed. Real estate group Embassy Group could prove to be collateral.

But let’s back up a bit.

On 14 August, We Co., looking to raise $3 billion from an IPO to fuel growth, made a pre-IPO filing in the US stock market. The filing laid bare the company’s innards—and it wasn’t pretty. 

The valuation it would get for the business fell from $47 billion to $10-15 billion in a matter of four weeks. Wall Street and public investors gave it a collective thumbs down.

WeWork was pushed to postpone its IPO, and its CEO Adam Neumann had to step down from the company while staying on as the company’s non-executive chairman. 

Not only is We Co’s own future at risk, but it also triggers what we, at The Ken, call a ‘risk by association’. Once-cheerleader and major investor SoftBank, which had poured $10.4 billion into the co-working company since 2017, now needs to decide if it has to write down the value of its 29% stake in We Co. Bankers, who had $100 million in fees waiting to be earned from the IPO, have been left stunned. 

Back in India, Embassy Group, owned by the 28th richest Indian, Jitu Virwani, could miss out on a billion-dollar-plus exit.

Bengaluru-based Embassy, in 2016, committed a $150 million investment into building and operating WeWork in India for five years. Unlike the 28 other countries in which it operates, We Co. entered into a joint venture with Embassy Group. 

Embassy foots the capital, builds, and operates WeWork, while We Co. enjoys a 12% cut from the revenue as a management fee for letting Embassy use the brand. In India, Embassy owns close to 90% shareholding in the JV. It even brought in Virwani’s son Karan Virwani as co-CEO to run the India operations by setting up a holding company for WeWork India, called Embassy Buildcon LLP. 

 “Karan was never in this for the long run. He was to go back to running the Group’s business, like his younger brother Aditya who is the COO of the group,” said a source in the co-working industry. 

Embassy now needs to pick-up after WeWork—something it probably didn’t expect it would have to do. It will have to now invest more instead of enjoying a luxurious exit.

Slow things down

The plan was to grow WeWork India to 100,000 seats by March 2020 and hand them over to We Co. But now, things are likely to end this year with about 65,000 seats.


Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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