IWG Navigates Global Shifts: Exits Russia, Absorbs WeWork Space, Faces Shareholder Push for US Listing

Flexible workspace giant IWG is undergoing significant strategic adjustments, marked by its withdrawal from the Russian market following the invasion of Ukraine, the absorption of prime office space vacated by rival WeWork in Hong Kong, and increasing pressure from a major shareholder to relocate its stock market listing to New York.

Key Takeaways

• IWG is ceasing operations in Russia due to the invasion of Ukraine.
• The company is taking over WeWork's former space in Hong Kong at a reduced cost.
• A significant shareholder is urging IWG to move its listing from London to New York to boost its valuation.

Russian Withdrawal

IWG, the parent company of brands like Regus and Spaces, has confirmed its decision to close its serviced office spaces in Russia. Mark Dixon, founder and chief executive, stated that while the company had been expanding in Russia, all investment has been halted, and they are gradually withdrawing. The company operates nine offices in Russia, primarily serving international firms that have been scaling back their own operations in the country. Dixon indicated that the withdrawal would occur as leases expire, emphasizing that supporting companies displaced from Ukraine, such as those relocating to Poland, Romania, and Portugal, is a priority. Despite the Russian exit, IWG is seeing a recovery in occupancy rates globally, nearing pre-pandemic levels of 75-85%, with pricing also on the rise.

Expansion into WeWork's Former Space

In Hong Kong, IWG is set to occupy a substantial 32,000 square feet of co-working space at Hysan Place in Causeway Bay, previously leased by WeWork. WeWork vacated the space in April, reportedly due to an uncertain economic outlook impacting small businesses and start-ups. IWG is expected to secure this prime location at a lower rental rate than WeWork's previous contract. This move will see IWG launch its "Signature by Regus" brand in Hong Kong, with the first corporate client already signed to occupy 25 seats. The expansion comes as rents in Causeway Bay have seen a notable decline.

Shareholder Pressure for US Listing

One of IWG's largest shareholders, Buckley Capital Management, has publicly called for the company to immediately switch its stock market listing from London to New York. Buckley argues that a US listing would provide better valuation multiples for IWG, citing the company's strong underlying earnings despite a share price significantly below pre-pandemic levels. They believe US investors have a greater appreciation for IWG's business model and leverage. The shareholder also suggested a major share buyback program as another means to enhance shareholder value. IWG has already taken steps to align with US markets, including switching its reporting currency to dollars and adopting US accounting principles. While IWG's leadership has previously acknowledged the possibility of a US listing, it has not been a top priority. Buckley has also indicated that if these measures do not improve the share price, exploring a sale of the business in the private markets should be considered.

Sources

• Serviced office provider IWG to close workspaces in Russia, The Times.
• Flexible workspace giant IWG takes over US rival WeWork’s abandoned office space in Hysan Place, Causeway Bay
  | South China Morning Post, South China Morning Post.
• Shareholder demands IWG switches its listing to New York, The Times.