Goldman Sachs CEO On WeWork: ‘I’m Not Sure That We Got It So Wrong’

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Topline: When asked about WeWork during a World Economic Forum panel at Davos on Tuesday, the chief executive of Goldman Sachs defended the bank’s work on the embattled coworking company’s botched public listing, while also acknowledging that valuations for tech startups have become skyhigh and need to become more grounded in reality.

• WeWork’s abandoned initial public offering was a “great example” of the listing process working, even if it was “not as pretty as everybody would like it to be,” CEO David Solomon said. “There were things that were right, there were things that were wrong.”
• “The banks were not valuing,” said Solomon, who insisted that “the process actually worked around WeWork” since due diligence and feedback from potential IPO investors were what eventually “ground it in reality.”
• Goldman Sachs was one of the leading banks on WeWork’s planned IPO last year, before the coworking office startup was forced to cancel its hotly-anticipated public offering amid mounting concerns over its lack of profitability, sky-high valuation and irregular corporate governance.
• Solomon also spoke about the clear divide between private and public company valuations, which he blamed on low interest rates: The fact that money has “basically been free” has led investors to overvalue a company’s growth projections and not focus enough on its underlying earnings, he argued.
• The Goldman CEO said that unlike public companies, private companies are “not held to the same standard around producing information… and that’s an issue.”

Crucial quote: “I think we’ve seen a little bit of a rebalancing where the need to really think about a path to profitability is coming more sharply into focus than it might have been 18 months ago,” Solomon said at Davos.&nbsp;

Big number: Goldman Sachs said last October that WeWork’s abandoned IPO and subsequent write-down had cost the bank $80 million.

Key background: Although 2019 promised to be a big year for IPOs, Wall Street investors lost confidence as shares of high-profile startups like Uber and Lyft both plunged in the months following their public market debuts. WeWork canceled its IPO altogether due to investor pushback against its high valuation, causing the coworking office startup to subsequently lose over $40 billion in paper value. Facing huge losses that put it on the verge of financial collapse, WeWork was eventually bailed out by its largest shareholder, Japanese conglomerate SoftBank, which provided a $10 billion lifeline. Under new leadership, WeWork has spent recent months downsizing its business in a bid to cut costs and revamp its struggling business.

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Topline: When asked about WeWork during a World Economic Forum panel at Davos on Tuesday, the chief executive of Goldman Sachs defended the bank’s work on the embattled coworking company’s botched public listing, while also acknowledging that valuations for tech startups have become skyhigh and need to become more grounded in reality.

• WeWork’s abandoned initial public offering was a “great example” of the listing process working, even if it was “not as pretty as everybody would like it to be,” CEO David Solomon said. “There were things that were right, there were things that were wrong.”
• “The banks were not valuing,” said Solomon, who insisted that “the process actually worked around WeWork” since due diligence and feedback from potential IPO investors were what eventually “ground it in reality.”
• Goldman Sachs was one of the leading banks on WeWork’s planned IPO last year, before the coworking office startup was forced to cancel its hotly-anticipated public offering amid mounting concerns over its lack of profitability, sky-high valuation and irregular corporate governance.
• Solomon also spoke about the clear divide between private and public company valuations, which he blamed on low interest rates: The fact that money has “basically been free” has led investors to overvalue a company’s growth projections and not focus enough on its underlying earnings, he argued.
• The Goldman CEO said that unlike public companies, private companies are “not held to the same standard around producing information… and that’s an issue.”

Crucial quote: “I think we’ve seen a little bit of a rebalancing where the need to really think about a path to profitability is coming more sharply into focus than it might have been 18 months ago,” Solomon said at Davos. 

Big number: Goldman Sachs said last October that WeWork’s abandoned IPO and subsequent write-down had cost the bank $80 million.

Key background: Although 2019 promised to be a big year for IPOs, Wall Street investors lost confidence as shares of high-profile startups like Uber and Lyft both plunged in the months following their public market debuts. WeWork canceled its IPO altogether due to investor pushback against its high valuation, causing the coworking office startup to subsequently lose over $40 billion in paper value. Facing huge losses that put it on the verge of financial collapse, WeWork was eventually bailed out by its largest shareholder, Japanese conglomerate SoftBank, which provided a $10 billion lifeline. Under new leadership, WeWork has spent recent months downsizing its business in a bid to cut costs and revamp its struggling business.