Thread by @eliotwb

Q: Is there any precedent for a company pulling a hotly anticipated IPO amid concerns about its valuation? Especially ones in the real estate leasing arbitrage business?

A: Why yes: Regus.

independent.co.uk/news/business/…

From the Independent in 99 (no link)

"Mr Dixon - and advisers Merrill Lynch International - appeared to hope the float would value Regus at between nine and ten times its revenue, or roughly #1bn. For a business in a new market, it proved to be an overly optimistic multiple"

"Property market analysts point out that Regus has little in the way of assets to back its cash flow as its burgeoning crop of centres are leased, not owned outright."

"It became clear yesterday, that potential investors had wanted at least another year's worth of numbers from Regus before they were willing to take the plunge."

So, Regus tried for 8-10x revenue multiple in 1999

Pulled amid low demand

Came back in 2000 and got ~4-5 x revenue multiple

US arm went bankrupt in 2003

Restructured

Now trading ~1-2 x revenue multiple. Profitable.

From Dow Jones in 2000:

"He said Regus is also recession-proof. In a recession, several factors emerge that are positive for Regus' business, Dixon said.

'If a recession occurs and money supply becomes limited, then businesses can rent office space from us'"

I could do this for hours.

"Regus could also be exposed to losses in time of recession. Its well established centres now have an occupancy level of 80%, compared with a break-even of 50-60% ... the expiry or break in Regus' lease is always longer than the customer contract"

Property Week 1999

" serious doubts were raised about the company....
It did not take long - 19 days in fact - for this negative sentiment to force Dixon to pull the float, even before the roadshow to institutional investors had started."

"Mr Dixon, the 39-year-old chief executive who founded Regus ten years ago, was worried that analysts found the business hard to value and were unsure about its expansion plans."

(Parallels end here: adam neumann is 40)

"But rather than be priced on current earnings, Regus wanted to be priced on future earnings. Any business that wants to be valued at nine to 10 times last year's #112m of sales must put up a convincing case about its strategy, and Dixon was not convincing enough."

"institutions were wary of the uncertainty created by the company's rapid expansion, especially over the past two years ... institutions are understood to have argued that the Regus business model needed to be proved in the new markets and centres"

Also just reupping this Fast Company cover story on Regus in 2000 as the "Office of the Future"

fastcompany.com/39371/office-f…

And for those interested, here's two more in-depth comparisons of the Regus vs WeWork history
wsj.com/articles/wewor…

wsj.com/articles/now-w…