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We offer a space-as-a-service model that we operationalize by using a global-local playbook powered by technology. Attractive Economics. We strive to operate our business so that each new location is accretive to our long-term financial performance, resulting in growing contribution margin. We strategically cluster locations in cities, leading to greater brand awareness and economies of scale, which, in turn, drives stronger monetization of our global platform.
Future Impact. We estimate that our penetration in our target cities globally is approximately 0. We have invested in the infrastructure for us to expand in existing and new markets, as well as expand the scope of our solutions and the products and services we offer our members. We have created a powerful ecosystem and brand that benefit not only our members and partners, but also our landlords, neighborhoods and cities through shared value creation.
We believe our powerful brand, global footprint, scalable business model and cost advantage are significant competitive advantages that will allow us to further penetrate existing and new markets and maximize the future impact of the WeWork effect. Our Growth Strategy. We are focused on long-term sustainable growth and intend to continue to learn from our data and experiences to innovate on what drives our member success and execute using our purpose-built technology and mission-driven team.
We intend to grow by:. Expanding in new and existing markets. Enhancing product and service offerings. Developing and strengthening relationships with enterprise members. Lowering upfront capital costs and improving operational efficiency. Investing in technology. Recent Developments. We aim to optimize our access to the capital markets and seek to have broad-based relationships with financial institutions.
In connection with this offering, we are expanding our relationships with banks from across the globe. Table of Contents Risk Factors. Some of these risks include:. Implications of Being an Emerging Growth Company. As such, we are permitted to rely on exemptions from certain disclosure and other requirements that are applicable to other public companies that are not emerging growth companies.
In particular, in this prospectus, we have taken advantage of certain reduced disclosure obligations regarding the provision of selected financial data and executive compensation arrangements. We have also taken advantage of the extended transition period for complying with new or revised accounting standards available to emerging growth companies. Accordingly, the information contained in this prospectus may be different from the information you might receive from other public companies.
Accordingly, Adam will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors. As a founder-led company, we believe that this voting structure aligns our interests in creating stockholder value. Therefore, we may elect not to comply with certain corporate governance standards, such as the requirement that our board of directors have a compensation committee and nominating and corporate governance committee composed entirely of independent directors.
For at least some period following completion of this offering, we intend to take advantage of these exemptions. Table of Contents Corporate Information. As a result of various reorganization transactions undertaken in July , The We Company became the holding company of our business, and the then-stockholders of WeWork Companies Inc. The We Company will consolidate the financial results of its subsidiaries, including the We Company Partnership, for financial accounting purposes.
The diagram below is a simplified depiction of our organizational structure immediately following the completion of this offering:. Corresponds to partnership interests in We Company Partnership held by certain members of our leadership team and their affiliates. Management fee based on revenue from the applicable joint venture. ChinaCo, PacificCo and JapanCo are consolidated in the consolidated financial statements included elsewhere in this prospectus. Table of Contents Our principal executive offices are located at West 18th Street, New York, New York , and our telephone number is Our website address is www.
Information contained on, or accessible through, our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference. Channels for Disclosure of Information. Investors, the media and others should note that, following the completion of this offering, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website, press releases, public conference calls and webcasts.
The information disclosed by the foregoing channels could be deemed to be material information. As such, we encourage investors, the media and others to follow the channels listed above and to review the information disclosed through such channels. Shares offered by us in this offering:. Shares to be outstanding upon completion of this offering:. Voting rights:. Voting as a single class. Conversion and related rights:. Use of proceeds. Risk factors. Unless otherwise noted, these references exclude:.
Unless otherwise indicated, the information contained in this prospectus is as of the date set forth on the cover of this prospectus and assumes or gives effect to:. WeWork Companies Inc. The historical financial information of The We Company has not been included in this prospectus as it was a newly incorporated entity at the time of the various reorganization transactions undertaken in July and had no assets, liabilities or business transactions or activities during the periods presented in this prospectus.
The following tables present the summary historical consolidated financial and other operating information for WeWork Companies Inc. The audited annual consolidated financial statements have been prepared in accordance with U. The summary condensed consolidated financial information as of June 30, and for the six months ended June 30, and has been derived from the unaudited interim condensed consolidated financial statements of WeWork Companies Inc.
The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for a fair statement of the unaudited interim condensed consolidated financial statements of WeWork Companies Inc.
The results of operations for the periods presented below are not necessarily indicative of the results to be expected for any future period. Consolidated statement of operations information:. Location operating expenses 1. Other operating expenses 1. Pre-opening location expenses. Sales and marketing expenses. General and administrative expenses 2.
Depreciation and amortization. Total expenses. Loss from operations. Interest and other income expense , net. Pre-tax loss. Income tax benefit provision. Net loss. Net loss attributable to noncontrolling interests. Net loss attributable to WeWork Companies Inc. Exclusive of depreciation and amortization shown separately on the depreciation and amortization line. Historical share and per share information does not give effect to the consummation of the stock split to be effected on the closing date of this offering.
Consolidated balance sheet information:. Cash and cash equivalents. Total current assets. Property and equipment, net. Total assets. Total liabilities. Total convertible preferred stock included as temporary equity. Total redeemable noncontrolling interests included as temporary equity. Total equity deficit.
The pro forma balance sheet information in this table gives effect to the IPO-related security conversions, the conversion of the convertible note and the exercise of the warrant. See Note 2 to the unaudited interim condensed consolidated financial statements included elsewhere in this prospectus. Table of Contents Key Performance Indicators.
In connection with the management of our WeWork space-as-a-service offering, we identify, measure and assess a variety of operational and financial metrics. The principal metrics we use in managing and evaluating our business are set forth below.
Any totals of the operational metrics presented as of a period end reflect the count as of the first day of the last month in the period. First-of-the-month counts are used because the economics of those counts generally impact the results for that monthly period. Workstation capacity in ones 1. Memberships in ones 2.
Enterprise membership percentage 3. Run-rate revenue in billions 4. Committed revenue backlog in billions 5. Contribution Margin. We use contribution margin to assess the profitability and performance of our locations both in the aggregate and on a location by location basis.
You should consider and read carefully all of the risks and uncertainties described below, as well as the other information included in this prospectus, including the consolidated financial statements and related notes appearing elsewhere in this prospectus, before making an investment decision.
The risks described below are not the only risks we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition, results of operations and prospects.
This prospectus also contains forward-looking statements that involve risks and uncertainties. Risks Relating to Our Business. Our business has grown rapidly, and we may fail to manage our growth effectively. We have experienced rapid growth in our business, including in the number of our locations and in the size of our membership base.
This rapid growth places a significant strain on our existing resources. Difficulties associated with our continued growth could result in harm to our reputation and could have a material adverse effect on our business, including our prospects for continued growth, and on our financial condition, results of operations and cash flows.
We expect our capital expenditures and operating expenses to increase on an absolute basis as we continue to invest in additional locations, launch additional solutions, products and services, hire additional team members and increase our marketing efforts. In particular, we expect to continue to invest in local infrastructure to support our continued growth.
As we continue to decentralize and localize certain decision-making and risk management functions, we may discover that our internal processes are ineffective or inefficient. In particular, to manage our rapid growth, we will need to enhance our reporting systems and procedures and continue to improve our operational, financial, management, sales and marketing and information technology infrastructure.
Continued growth could also strain our ability to maintain reliable service levels for our members. If we do not manage our growth effectively, increases in our capital expenditures and operating expenses could outpace any increases in our revenue, which could have a material adverse effect on our results of operations. Our rapid growth may not be sustainable.
Our historical growth rates may not be indicative of future growth. The market for our solutions, products and services may not continue to grow at the rate we expect or at all, and our memberships may decline as a result of increased competition in the space-as-a-service sector or the maturation of our business.
Additionally, as we grow, the ability of our management to source sufficient reasonably-priced opportunities for new locations of the type we have historically targeted or to develop and launch additional solutions, products and services may become more limited. Our business strategy includes entering into new markets and introducing new solutions, products and services. This strategy is inherently risky, may not be successful and could be costly. We may also continue to pursue new strategic opportunities, including real estate acquisition and management.
Such expansion efforts also generally involve significant risks and uncertainties, including distraction of management from our existing solutions, products and services and the operations of our existing locations. As we attempt to grow our foothold in an evolving industry and acquire new businesses that enhance value for our members, we may encounter issues and risks not discovered in our development or analysis of such expansion efforts.
Our operations in any new markets or solutions, products and services into which we expand may also generate less revenue or cash flow than our core WeWork space-as-a-service offering in our existing locations. Our expansion efforts have required, and we expect them to continue to require, substantial resources and management attention. Table of Contents products and services. However, as we expand into new markets and introduce new solutions, products and services, our members may not be satisfied with our solutions, products and services, including any new offerings that we launch.
The time, money, energy and other resources we dedicate to exploring and pursuing new solutions, products and services may be greater than the short-term, and potentially the total, returns from these new offerings. We will also face new operational risks and challenges as we continue to enter into new markets.
Expansion into foreign jurisdictions subjects us to legal, regulatory, economic and political risks that may be different from and additional to those that we face in jurisdictions where we currently operate, and we may operate at a disadvantage relative to competitors who are more familiar with local market practices and networks. Expansion into new solutions, products and services subjects us to similar risks as we compete with the many established participants in those markets, and we face additional regulatory, legal and execution risks as we implement new business practices and integrate a new offering into our existing range of solutions, products and services.
To the extent the benefits of our expansion efforts do not meet our expectations, we may recognize a loss on our investment or gains that do not justify our investment. Our success in this regard may increasingly depend on the financial success and cooperation of local partners and other third parties.
We have a history of losses and, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability at a company level as determined in accordance with GAAP for the foreseeable future. Our accumulated deficit and net losses have historically resulted primarily from the substantial investments required to grow our business, including the significant increase in recent periods in the number of locations we operate.
We expect that these costs and investments will continue to increase as we continue to grow our business. We also intend to invest in maintaining our high level of member service and support, which we consider critical to our continued success. We also expect to incur additional general and administrative expenses as a result of our growth. These expenditures will make it more difficult for us to achieve profitability, and we cannot predict whether we will achieve profitability for the foreseeable future.
Although we do not currently believe our net loss will increase as a percentage of revenue in the long term, we believe that our net loss may increase as a percentage of revenue in the near term and will continue to grow on an absolute basis. Our operating costs and other expenses may be greater than we anticipate, and our investments to make our business and our operations more efficient may not be successful. Increases in our costs, expenses and investments may reduce our margins and materially adversely affect our business, financial condition and results of operations.
In addition, non-mature locations and pipeline locations may not generate revenue or cash flow comparable to those generated by our existing mature locations, and our mature locations may not be able to continue to generate existing levels of revenue or cash flow. Further, our We Company offerings, such as WeLive, WeGrow, Flatiron School and Meetup, and additional We Company offerings that we may launch or acquire in the future, may not generate meaningful revenue or cash flow.
For any of these reasons, we may be unable to achieve profitability for the foreseeable future and may face challenges in growing our cash flows. We may not be able to continue to retain existing members, most of whom enter into membership agreements with short-term commitments, or to attract new members in sufficient numbers or at sufficient rates to sustain and increase our memberships or at all. We principally generate revenues through the sale of memberships.
We have in the past experienced, and expect to continue to experience, membership agreement terminations. In many cases, our members may terminate their membership agreements with us at any time upon as little notice as one calendar month. Members may cancel their memberships for many reasons, including a perception that they do not make sufficient use of our solutions and services, that they need to reduce their expenses or that alternative work environments may provide better value or a better experience.
Table of Contents Our results of operations could be adversely affected by declines in demand for our memberships. Demand for our memberships may be negatively affected by a number of factors, including geopolitical uncertainty, competition, cybersecurity incidents, decline in our reputation and saturation in the markets where we operate. Prevailing general and local economic conditions may also negatively affect the demand for our memberships, particularly from current and potential members that are small- and mid-sized businesses and may be disproportionately affected by adverse economic conditions.
Substantially all of our leases with our landlords are for terms that are significantly longer than the terms of our membership agreements with our members. The average length of the initial term of our U. If we are unable to replace members who may terminate their membership agreements with us, our cash flows and ability to make payments under our lease agreements with our landlords may be adversely affected.
These same factors that reduce demand for our memberships may not have the same impact on a landlord that has longer commitments from its tenants than we have from our members. We must continually add new members both to replace departing members and to expand our current member base.
We may not be able to attract new members in sufficient numbers to do so. Even if we are able to attract new members to replace departing members, these new members may not maintain the same level of involvement in our community. In addition, the revenue we generate from new members may not be as high as the revenue generated from existing members because of discounts we may offer to these new members, and we may incur marketing or other expenses, including referral fees, to attract new members, which may further offset our revenues from these new members.
For these and other reasons, we could experience a decline in our revenue growth, which could adversely affect our results of operations. An economic downturn or subsequent declines in market rents may result in increased member terminations and could adversely affect our results of operations. While we believe that we have a durable business model in all economic cycles, there can be no assurance that this will be the case.
A significant portion of our member base consists of small- and mid-sized businesses and freelancers who may be disproportionately affected by adverse economic conditions. In addition, our concentration in specific cities magnifies the risk to us of localized economic conditions in those cities or the surrounding regions. A majority of our locations in the United Kingdom are in London. Economic downturns in these markets or other markets in which we are growing our number of locations may have a disproportionate effect on our revenue and our ability to retain members, in particular among members that are small- and mid-sized businesses, and thereby require us to expend time and resources on sales and marketing activities that may not be successful and could impair our results of operations.
While our business has withstood localized recessions in various geographies, we have yet to experience a global economic downturn since founding our business. In addition, our business may be affected by generally prevailing economic conditions in the markets where we operate, which can result in a general decline in real estate activity, reduce demand for our solutions and services and exert downward pressure on our revenue. We may not be able to successfully negotiate satisfactory arrangements in respect of spaces that we occupy, or renew or replace existing spaces on satisfactory terms or at all, any of which will necessarily constrain our ability to grow our member base.
We currently lease real estate for the majority of our locations, and we are actively pursuing management agreements and participating leases, under which the landlord pays in whole or in part for the build-out costs, and other occupancy arrangements with real estate owners. If we are unable to negotiate these lease and other arrangements on satisfactory terms, we may not be able to expand our portfolio of locations. Our lease renewal options are typically tied to upward-only rent reviews, whereby rent for any given lease renewal term is typically equal to the greater of the rent in effect for the period immediately prior to the rent review date and the then-prevailing net effective rent in the open market.
As a result, increases in rental rates in the markets in which we. Table of Contents operate, particularly in those markets where initial terms under our leases are shorter, could adversely affect our business, financial condition, results of operations and prospects. In addition, our ability to negotiate favorable terms to extend an expiring lease or to secure an alternate location will depend on then-prevailing conditions in the real estate market, such as overall rental cost increases, competition from other would-be tenants for desirable leased spaces and our relationships with current and prospective building owners and landlords, and may depend on other factors that are not within our control.
If we are not able to renew or replace an expiring lease, we will incur significant costs related to vacating that space and redeveloping whatever alternative space we are able to find, if any. In addition, if we are forced to vacate a space, we could lose members who purchased memberships based on the design, location or other attributes of that particular space and may not be interested in the other spaces we have available.
As we continue to expand our presence into certain international markets, including Europe, Latin America, China, Japan and the Pacific, local market practices may require us to enter into leases that have shorter initial terms, which reduces the certainty of our future obligations with respect to these locations and the continued availability of our occupied spaces at these locations.
The long-term and fixed-cost nature of our leases may limit our operating flexibility and could adversely affect our liquidity and results of operations. We currently lease a significant majority of our locations under long-term leases that, with very limited exceptions, do not contain early termination provisions.
Our obligations to landlords under these agreements extend for periods that significantly exceed the length of our membership agreements with our members, which may be terminated by our members upon as little notice as one calendar month.
Our leases generally provide for fixed monthly payments that are not tied to space utilization or the size of our member base, and all of our leases contain minimum rental payment obligations. As a result, if members at a particular space terminate their membership agreements with us and we are not able to replace these departing members, our lease cost expense may exceed our revenue. In addition, in an environment where cost for real estate is decreasing, we may not be able to lower our fixed monthly payments under our leases at rates commensurate with the rates at which we would be pressured to lower our monthly membership fees, which may also result in our rent expense exceeding our membership and service revenue.
In any such event, we would not have the ability to reduce our rent under the lease or otherwise terminate the lease in accordance with its terms. If we experience a prolonged reduction in revenues at a particular space, our results of operations in respect of that space would be adversely affected unless and until the lease expires or we are able to assign the lease or sublease the space to a third party.
Our ability to assign a lease or sublease the space to a third party may be constrained by provisions in the lease that restrict these transfers without the prior consent of the landlord. Additionally, we could incur significant costs if we decide to assign or sublease unprofitable leases, as we may incur transaction costs associated with finding and negotiating with potential transferees, and the ultimate transferee may require upfront payments or other inducements.
Moreover, our leases generally contain notice requirements in connection with certain transactions, including the reorganization transactions or the incurrence of indebtedness, as well as this offering. The failure to deliver notice or satisfy the conditions related to providing such notices to our landlords and members could result in defaults under such leases.
If we default under the terms of our leases and cease operations at leased spaces, we could be exposed to breach of contract and other claims, which could result in direct and indirect costs to us and could result in operational disruptions that could harm our reputation, brand and result of operations. Additionally, we are party to a variety of lease agreements and other occupancy arrangements, including management agreements and participating leases, containing a variety of contractual rights and obligations that may be subject to interpretation.
Our interpretation of such contracts may be disputed by our landlords or members, which could result in litigation, damage to our reputation or contractual or other legal remedies becoming available to such landlords and members and may impact our results of operations. While our leases are often held by special purpose entities, our consolidated financial condition and results of operations depend on the ability of our subsidiaries to perform their obligations under these leases over time.
We may determine that it is necessary to fund the lease payments of our subsidiaries beyond the terms of. Table of Contents our limited parent guarantees if applicable , in which case any difficulty of our subsidiaries in performing their obligations under our leases could affect our liquidity. In addition, we provide credit support in respect of our leases in the form of letters of credit, cash security deposits and surety bonds.
If our subsidiaries were to default under their leases, the applicable landlords could draw under the letters of credit or demand payment under the surety bonds, which could adversely affect our financial condition and liquidity. In addition, under our surety bonds, the applicable surety has the right to request collateral, including cash collateral or letters of credit, at any time the surety bonds are outstanding.
We are also pursuing strategic alternatives to pure leasing arrangements, including management agreements, participating leases and other occupancy arrangements with respect to spaces. Some of our agreements contain penalties that are payable in the event we terminate the arrangement. In addition, we have limited experience to date with these types of transactions, and we may not be able to successfully complete additional transactions on commercially reasonable terms or at all.
For example, we have entered into several transactions with our Co-Founder and Chief Executive Officer, Adam Neumann, including leases with landlord entities in which Adam has or had a significant ownership interest.
We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties hold ownership interests. Transactions with a landlord entity in which related parties hold ownership interests present potential for conflicts of interest, as the interests of the landlord entity and its shareholders may not align with the interests of our stockholders with respect to the negotiation of, and certain other matters related to, our lease with that landlord entity.
For example, conflicts may arise in connection with decisions regarding the structure and terms of the lease, tenant improvement allowances or termination provisions. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these leases, such as the treatment of events of default. Our leases with landlords generally provide that, if the landlord declines to reimburse us for buildout expenses or other tenant improvement allowances for which we have the right to be reimbursed under the relevant lease, we may apply such receivables as an offset to our related rental obligations on those impacted leases.
Certain of our leases with related parties, including those with landlord entities in which Adam holds a significant ownership interest, provide for tenant improvement allowances. If any of these entities declined to reimburse us for buildout expenses to which we were entitled under the relevant lease, we expect that we would apply such receivables as an offset to our related rental obligations on those impacted leases. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties and these transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.
A significant part of our international growth strategy and international operations will be conducted through joint ventures, and disputes with our partners may adversely affect our interest in these joint ventures. Our international growth strategy has included entering into joint ventures in non-U. Our success in these regions therefore depends on third parties whose actions we cannot control. Although in the case of certain of these joint ventures we have the right to appoint a majority of the members of the board of directors, there are many significant matters for which we require the consent of our partners in these joint ventures.
Our partners in these joint ventures may have interests that are different from ours, and we may disagree with our partners as to the resolution of a particular issue to come before the joint venture or as to the. Table of Contents management or conduct of the business of the joint venture in general.
In addition, in connection with these joint ventures and other strategic partnerships, we have entered into certain agreements that provide our partners with exclusivity or other preemptive rights that may limit our ability to pursue business opportunities in the manner that we desire.
We may not be able to resolve any dispute relating to our business, operations or management of the relevant joint venture, which could have a material adverse effect on our interest in the joint venture or the business of the joint venture in general. Some of the counterparty risks we face with respect to our members are heightened in the case of enterprise members.
Memberships attributable to enterprise members generally account for a high proportion of our revenue at a particular location, and some of our locations are occupied by just one enterprise member. A default by an enterprise member under its agreement with us could cause a significant reduction in the operating cash flow generated by the location where that enterprise member is situated.
We would also incur certain costs following an unexpected vacancy by an enterprise member. The greater amount of available space generally occupied by any enterprise member relative to our other members means that the time and effort required to execute a definitive agreement is greater than the time and effort required to execute membership agreements with individuals or small- or mid-sized businesses. In addition, in some instances, we offer configured solutions that require us to customize the workspace to the specific needs and brand aesthetics of the enterprise member, which may increase our build-out costs and our net capex per workstation added.
If enterprise members were to delay commencement of their membership agreements, fail to make membership fee payments when due, declare bankruptcy or otherwise default on their obligations to us, we may be forced to terminate their membership agreements with us, which could result in sunk costs and transaction costs that are difficult or impossible for us to recover.
We are exposed to risks associated with the development and construction of the spaces we occupy. Opening new locations subjects us to risks that are associated with development projects in general, such as delays in construction, contract disputes and claims, and fines or penalties levied by government authorities relating to our construction activities.
We may also experience delays opening a new location as a result of delays by the building owners or landlords in completing their base building work or as a result of our inability to obtain, or delays in our obtaining, all necessary zoning, land-use, building, occupancy and other required governmental permits and authorizations.
We seek to open new locations on the first day of a month and delays, even if the delay only lasts a few days, can cause us to defer opening a new location by a full month. Failure to open a location on schedule may damage our reputation and brand and may also cause us to incur expenses in order to rent and provide temporary space for our members or to provide those members with discounted membership fees. In developing our spaces, we generally rely on the continued availability and satisfactory performance of unaffiliated third-party general contractors and subcontractors to perform the actual construction work and, in many cases, to select and obtain certain building materials, including in some cases from sole-source suppliers of such materials.
As a result, the timing and quality of the development of our occupied spaces depends on the performance of these third parties on our behalf. We do not have long-term contractual commitments with general contractors, subcontractors or materials suppliers.
The prices we pay for the labor or materials provided by these third parties, or other construction-related costs, could unexpectedly increase, which could have an adverse effect on the viability of the projects we pursue and on our results of operations and liquidity. Skilled parties and high-quality materials may not continue to be available at reasonable rates in the markets in which we pursue our construction activities. The people we engage in connection with a construction project are subject to the usual hazards associated with providing construction and related services on construction project sites, which can cause personal injury and loss of.
Table of Contents life, damage to or destruction of property, plant and equipment, and environmental damage. Our insurance coverage may be inadequate in scope or coverage amount to fully compensate us for any losses we may incur arising from any such events at a construction site we operate or oversee. In some cases, general contractors and their subcontractors may use improper construction practices or defective materials.
Improper construction practices or defective materials can result in the need to perform extensive repairs to our spaces, loss of revenue during the repairs and, potentially, personal injury or death. We also can suffer damage to our reputation, and may be exposed to possible liability, if these third parties fail to comply with applicable laws. Supply chain interruptions may increase our costs or reduce our revenues. We depend on the effectiveness of our supply chain management systems to ensure reliable and sufficient supply, on reasonably favorable terms, of materials used in our construction and development and operating activities, such as furniture, lighting, millwork, wood flooring, security equipment and consumables.
The materials we purchase and use in the ordinary course of our business are sourced from a wide variety of suppliers around the world. Disruptions in the supply chain may result from weather-related events, natural disasters, trade restrictions, tariffs, border controls, acts of war, terrorist attacks, third-party strikes or ineffective cross dock operations, work stoppages or slowdowns, shipping capacity constraints, supply or shipping interruptions or other factors beyond our control.
In the event of disruptions in our existing supply chain, the labor and materials we rely on in the ordinary course of our business may not be available at reasonable rates or at all. In some cases, we may rely on a single source for procurement of construction materials or other supplies in a given region. Any disruption in the supply of certain materials could disrupt operations at our existing locations or significantly delay our opening of a new location, which may cause harm to our reputation and results of operations.
We incur costs relating to the maintenance, refurbishment and remediation of our spaces. The terms of our leases generally require that we ensure that the spaces we occupy are kept in good repair throughout the term of the lease. The terms of our leases may also require that we return the space to the landlord at the end of the lease term in the same condition it was delivered to us, which, in such instances, will require removing all fixtures and improvements to the space.
The costs associated with this maintenance, removal and repair work may be significant. We also anticipate that we will be required to periodically refurbish our spaces to keep pace with the changing needs of our members. Extensive refurbishments may be more costly and time-consuming than we expect and may adversely affect our results of operations and financial condition.
Our member experience may be adversely affected if extensive refurbishments disrupt our operations at our locations. Our growth and success depends on our ability to maintain the value and reputation of our brand and the success of our strategic partnerships.
Our brand is integral to our business as well as to the implementation of our strategies for expanding our business. In , we launched a global rebranding effort that may affect our ability to attract and retain members, which may have a material adverse effect on our business or results of operations. Maintaining, promoting and positioning our brand will depend largely on our ability to provide a consistently high quality member experience and on our marketing and community-building efforts.
To the extent our locations, workspace solutions or product or service offerings are perceived to be of low quality or otherwise are not compelling to new and existing members, our ability to maintain a positive brand reputation may be adversely affected.
In addition, failure by third parties on whom we rely but whose actions we cannot control, such as general contractors and construction managers who oversee our construction activities or facilities management staff, to uphold a high standard of workmanship, ethics, conduct and legal compliance could subject us to reputational harm based on their association with us and our brand. As we pursue our growth strategies of entering into joint ventures, revenue-sharing arrangements and other partnerships with local partners in non-U.
We receive a high degree of media coverage domestically and internationally and we believe that much of our reputation depends on word-of-mouth and other non-paid sources of opinion, including on the internet. Table of Contents publicity or consumer perception or experience of our solutions, practices, products or services could adversely affect our reputation, resulting in difficulties in attracting and retaining members and business partners, and limiting the success of our community-building efforts and the range of solutions, products and services we are able to offer.
Historically, many of our members have signed up for memberships because of positive word-of-mouth referrals by existing members, which has reduced our need to rely on traditional marketing efforts. To the extent that we are unable to maintain a positive brand reputation organically, we may need to rely more heavily on traditional marketing efforts to attract new members, which would increase our sales and marketing expenses both in absolute terms and as a percentage of our revenue.
If our employees, members of our community or other people who enter our spaces act badly, our business and our reputation may be harmed. Our emphasis on our mission and values makes our reputation particularly sensitive to allegations of violations of community rules or applicable laws by our members, employees or other people who enter our spaces.
While we verify the identity of any individual interested in joining our community, we do not conduct extensive background checks or otherwise extensively vet potential members prior to entering into membership agreements that provide them or their employees access to our locations. If our members, employees or other people violate our policies or engage in illegal or unethical behavior, or are perceived to do so, we may be the subject of negative publicity and our reputation may be harmed.
These bad acts may also encourage existing members to leave our locations and make it more difficult for us to recruit new members at that location, which would adversely impact our results of operations for the affected location. If our pricing and related promotional and marketing plans are not effective, our business and prospects may be negatively affected. Our business and prospects depend on the impact of pricing and related promotional and marketing plans and our ability to adjust these plans to respond quickly to economic and competitive conditions.
If our pricing and related promotional and marketing plans are not successful, or are not as successful as those of competitors, our revenue, membership base and market share could decrease, thereby adversely impacting our results of operations. We may make decisions consistent with our mission that may reduce our short- or medium-term operating results.
Our mission is integral to everything we do, and many of our strategic and investment decisions are geared toward improving the experience of our members and the attractiveness of our community. While we believe that pursuing these goals will produce benefits to our business in the long-term, these decisions may adversely impact our short- or medium-term operating results and the long-term benefits that we expect to result from these initiatives may not materialize within the timeframe we expect or at all, which could harm our business and financial results.
We may be unable to adequately protect or prevent unauthorized use of our trademarks and other proprietary rights and we may be prevented by third parties from using or registering our trademarks or other intellectual property. To protect our trademarks and other proprietary rights, we rely and expect to continue to rely on a combination of protective agreements with our employees and third parties including local or other strategic partners we may do business with , physical and electronic security measures and trademark, copyright, patent and trade secret protection laws.
In certain jurisdictions, rights in trademarks are derived from registration of the trademark. We may not have trademark rights in a jurisdiction where our trademarks are not registered, including with respect to any new brands and existing brands associated with new offerings. We have obtained a strategic set of trademark, copyright and patent applications or registrations in the United States and other jurisdictions and have filed, and we expect to file from time to time, additional trademark, copyright and patent applications.
Nevertheless, these applications may not proceed to registration or issuance and in any event may not be comprehensive particularly with respect to non-U. Third parties may also take the position that we are infringing their rights, and we may not be. Table of Contents successful in defending these claims. For example, we have received correspondence from third parties asserting potential claims of trademark infringement with respect to some of our WE names and trademarks.
We dispute these assertions. Additionally, we may not be able to enforce or defend our proprietary rights or prevent infringement or misappropriation without substantial expense to us and a significant diversion of management time and attention from our business strategy. We currently hold various domain names relating to our brand, most importantly wework.
Competitors and others could attempt to capitalize on our brand recognition by using domain names or social media handles similar to those we hold. We may be unable, without significant cost or at all, to maintain or protect our use of domain names and social media handles or prevent third parties from acquiring domain names or social media handles that are similar to, infringe upon or otherwise decrease the value of our trademarks and other proprietary rights in our domain names.
If the measures we have taken to protect our proprietary rights are inadequate to prevent unauthorized use or misappropriation by third parties or such rights are diminished or we are prevented from using intellectual property due to successful third-party challenges, the value of our brand and other intangible assets may be diminished and our business and results of operations may be adversely affected. We rely on a combination of proprietary and third-party technology systems to support our business and member experience, and, if these systems experience difficulties, our business, financial condition, results of operations and prospects may be materially adversely affected.
We use a combination of proprietary technology and technology provided by third-party service providers to support our business and our member experience. For example, the WeWork app, which we developed in-house but which incorporates third-party and open source software where appropriate, connects local communities and develops and deepens connections among our members, both at particular spaces and across our global network.
We also use technology of third-party service providers to help manage the daily operations of our business. For example, we rely on our own internal systems as well as those of third-party service providers to process membership payments and other payments from our members. To the extent we experience difficulties in the operation of technologies and systems we use to manage the daily operations of our business or that we make available to our members, our ability to operate our business, retain existing members and attract new members may be impaired.
We may not be able to attract and retain sufficiently skilled and experienced technical or operations personnel and third-party contractors to operate and maintain these technologies and systems, and our current product and service offerings may not continue to be, and new product and service offerings may not be, supported by the applicable third-party service providers on commercially reasonable terms or at all.
Although our agreements with our third-party service providers often contain indemnities in our favor with respect to these eventualities, we may not be indemnified for these claims or we may not be successful in obtaining indemnification to which we are entitled. We generate significant amounts of proprietary, sensitive and otherwise confidential information relating to our business and operations, and we collect, store and process confidential and personal data regarding our members, including member names and billing data.
Our proprietary information and data is maintained on our own systems as well as the systems of third-party service providers. Table of Contents Similar to other companies, our information technology systems face the threat of cyber-attacks, such as security breaches, phishing scams, malware and denial-of-service attacks. Because techniques used to obtain unauthorized access to systems or sabotage systems change frequently and may not be known until launched against us or our service providers, we and they may be unable to anticipate these attacks or implement adequate preventative measures.
In addition, any party who is able to illicitly obtain identification and password credentials could potentially gain unauthorized access to our systems or the systems of our third-party service providers.
If any such event occurs, we may have to spend significant capital and other resources to notify affected individuals, regulators and others as required under applicable law, mitigate the impact of the event and develop and implement protections to prevent future events of that nature from occurring. From time to time, employees make mistakes with respect to security policies that are not always immediately detected by compliance policies and procedures. These can include errors in software implementation or a failure to follow protocols and patch systems.
Employee errors, even if promptly discovered and remediated, may disrupt operations or result in unauthorized disclosure of confidential information. We have experienced unauthorized breaches of our systems prior to this offering, which we believe did not have a material effect on our business. If a data security incident occurs, or is perceived to occur, we may be the subject of negative publicity and the perception of the effectiveness of our security measures and our reputation may be harmed, which could damage our relationships and result in the loss of existing or potential members and adversely affect our results of operations and financial condition.
In addition, even if there is no compromise of member information, we could incur significant regulatory fines, be the subject of litigation or face other claims. In addition, our insurance coverage may not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related data and system incidents. Although we expect to become Payment Card Industry Data Security Standard PCI DSS compliant in , our practices with respect to this type of information are evolving and do not yet fully comply with that industry standard and other applicable guidelines.
Additionally, if new operating rules or interpretations of existing rules are adopted regarding the processing of credit cards that we are unable to comply with, we could lose the ability to give members the option to make electronic payments, which could result in the loss of existing or potential members and adversely affect our business. Our reputation, competitive advantage, financial position and relationships with our members could be materially harmed if we are unable to comply with complex and evolving data protection laws and regulations, and the costs and resources required to achieve compliance may have a materially adverse impact on our business.
The collection, protection and use of personal data are governed by privacy laws and regulations enacted in the United States, Europe, Asia and other jurisdictions around the world in which we operate. These laws and regulations continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with applicable privacy laws and regulations may increase our costs of doing business and adversely impact our ability to conduct our business and market our solutions, products and services to our members and potential members.
The GDPR imposes significant obligations, and compliance with these obligations depends in part on how particular regulators apply and interpret them. Further, any U. Other U. If we fail to comply. PIPEDA provides Canadian residents with privacy protections and sets out rules for how companies may collect, use and disclose personal information in the course of commercial activities. The costs of compliance with, and other burdens imposed by, these and other international data privacy and security laws may limit the use and adoption of our solutions, products and services and could have a materially adverse impact on our business.
This book explains the financial appraisal of capital budgeting projects. The Delphi technique applied to appraising forestry projects. Example The writing of this book was motivated by the lack of a suitable capital budgeting textbook.
Given the range of investment appraisal methods and the need for a business to The risk of a capital investment will vary according to factors such as: Jim is a well-known Business writer and presenter as well as being one of the UK's. Given the range of investment appraisal methods and the need for a business to allocate resources to capital expenditure in an appropriate way, what key factors do management need to consider when making their investments?
All business investments involve risk — the probability that the hoped-for outcome will not happen. An investment needs to earn a return that compensates for the risk. The longer the project, the greater the risk that estimated revenues, costs and cash flows prove unrealistic. Are estimated project profits and cash flows based on detailed research, gut feel, or a little of both? An investment that uses a substantial proportion of the available business funds is, by definition, more risky than a smaller project.
Risk is also about the consequences to the business if something goes wrong! Most projects will make assumptions about demand, costs, pricing etc which can become wildly inaccurate through changing market and economic conditions. A project in a market in which the management team has strong experience is a lower-risk proposition than one in which the business is taking a step into the unknown!
An investment decision is not just about the numbers. A spread sheet calculation for NPV or ARR might suggest a particular decision, but management also need to take account of qualitative issues such as:. Many firms set what are known as "investment criteria" against which they judge investment projects. A problem with the three main investment appraisal methods is that they can generate seemingly contradictory results.
For example, an investment might have a long payback period because the returns only occur several years into the project possibly too long to be acceptable. However, if those returns are significant to the original investment, it is likely that the NPV or ARR would suggest going ahead.
The use of investment criteria is intended to help guide management through these decisions and address the potential conflicts. So possible criteria might suggest only accepting investment proposals which meet at least two of the following:. Join s of fellow Business teachers and students all getting the tutor2u Business team's latest resources and support delivered fresh in their inbox every morning.
Jim co-founded tutor2u alongside his twin brother Geoff! Jim is a well-known Business writer and presenter as well as being one of the UK's leading educational technology entrepreneurs. Reach the audience you really want to apply for your teaching vacancy by posting directly to our website and related social media audiences. Cart Account Log in Sign up. Business Explore Business Search Go. Business Reference library.
The key issues to consider are: Risks and uncertainties All business investments involve risk — the probability that the hoped-for outcome will not happen. The risk of a capital investment will vary according to factors such as: Length of the project The longer the project, the greater the risk that estimated revenues, costs and cash flows prove unrealistic Source of the data Are estimated project profits and cash flows based on detailed research, gut feel, or a little of both?
The size of the investment An investment that uses a substantial proportion of the available business funds is, by definition, more risky than a smaller project. The economic and market environment A major issue for most large investments Most projects will make assumptions about demand, costs, pricing etc which can become wildly inaccurate through changing market and economic conditions The experience of the management team A project in a market in which the management team has strong experience is a lower-risk proposition than one in which the business is taking a step into the unknown!
Qualitative influences on investment appraisal An investment decision is not just about the numbers. A spread sheet calculation for NPV or ARR might suggest a particular decision, but management also need to take account of qualitative issues such as: The impact on employees Product quality and customer service Consistency of the investment decision with corporate objectives The business' brand and image, including reputation Implications for production and operations, including any disruption or change to the existing set-up A business' responsibilities to society and other external stakeholders Quantitative influences on investment appraisal The investment appraisal comes up with a result, but how is a decision made?
Subscribe to email updates from tutor2u Business Join s of fellow Business teachers and students all getting the tutor2u Business team's latest resources and support delivered fresh in their inbox every morning. You're now subscribed to receive email updates! Print page. Related Collections. You might also like. Factors Influencing Investment Decisions Student videos.
Financial Objectives Study notes.
In larger organisations other approval processes should be in place, with managers aware of their own level of authority. A formal sign-off by each relevant party can help reduce the number of poor proposals by increasing accountability. There are a number of analytical techniques suitable for assessing an investment proposal in financial terms.
They are based on estimates of the future cash flows associated with a project and include:. Most companies use several methods to assess a significant investment project as part of the investment appraisal process. Different methods can give conflicting results and so care should be taken. For more details of these, together with the methods outlined above, see the Finance and Management Faculty Special Report on Investment Appraisal. Investments should be timed to minimise disruption to the organisation and to create synergies with other potential proposals.
Ensure each project is implemented according to the investment plans, with progress regularly reviewed. A review after the investment has been completed should be carried out to assess how well the process went, and the information used to improve future appraisals and investment decisions.
See also the Investment Appraisal resources for members in business. The information contained in this article is for general guidance only and does not constitute advice. You should always seek professional advice for your personal circumstances. Please read the full disclaimer.
Skip to content. Carrying out investment appraisals For most organisations, capital investment is a significant activity. Identifying opportunities A culture which facilitates the identification of potential capital investments within the organisation is important. Investment proposals All of the relevant information should be brought together when an investment is proposed.
Financial analysis There are a number of analytical techniques suitable for assessing an investment proposal in financial terms. They are based on estimates of the future cash flows associated with a project and include: payback method — the number of years it is expected to take to recover the original investment from the net cash flows.
The IRR is that discount rate which produces a net present value of zero. Cheung, J. Christy, G. Collier, P. Hotels Sector, Management Accounting Research , 6 1 , 33— Dayananda, D. Deegan, C, and Unerman, J. Dempsey, M. Dimitratos, P. Drury, C. Dugdale, D. Eisenhardt, M. Emmanuel, C. Friedman, M. Fruitticher, I. Gitman, L. Boston, MA: Pearson International. Graham, R. Grundy, T. Guilding, C. Haka, F. Harris, E.
Harvey, M. Hastie, K. Hayes, R. Hickson, D. Hirst, M. Ho, S. Hofstede, G. Horngren, T. Hopwood, A. Howell, D. Jensen, C. Jones, C. Joshi, L. Kahneman, D. Kaplan, R. Kester, W. Kester, G. Kim, S. King, P. Klammer, T. Lazaridis, T. Lefley, F. Marsh, R. Pettigrew ed. Mensah, M, and Miranti, J. Miller, P. Miller P. Mintzberg, D. Nielsen, B. Nixon, B. Northcott, D. Phelan, S. Pike, R. Powell, C. Putterill, M. Ronen, J.
Drushim forex broker information contained in this facilitates the identification of potential for assessing an investment proposal. Kaplan, R. Please read the full disclaimer. Carrying out investment appraisals For according to the investment plans, - Watts, R. They are based on estimates of the future cash flows carried out to assess how well the process went, and the information used to improve future appraisals and investment decisions net cash flows. Identifying opportunities A culture which be timed to minimise disruption above, see the Finance and. Long Range Planning42 results and so care should. Different methods can give conflicting. Mensah, M, and Miranti, J. PARAGRAPHA formal sign-off by each number of analytical techniques suitable the number of poor proposals in financial terms.specific capital investment appraisal methods; namely, the pressure of for market opportunities, being creators of change to which their competitors must respond. What percentage of firms has an investment manual and what are the main. Capital investment appraisal techniques pdf writer. increased use of more sophis- ticated investment appraisals requiring the application of discounted cash flow. flow methods. These are capital budgeting techniques for project appraisal prolific job creators, the seeds of big businesses, and the fuel of national economic.