WeWork is slashing its IPO valuation to less than $25 billion

The valuation targets for controversial real estate company WeWork are being dramatically lowered and the real estate company will not go public next week, sources told CNBC’s David Faber.

Even at a $25 billion valuation, the demand is not there, according to the sources. WeWork last raised money at a $47 billion valuation in the private market.

WeWork’s earlier valuation came after SoftBank, the company’s biggest backer, invested $5 billion in primary growth capital and an additional $1 billion in secondary funding.

WeWork rents out work spaces to start-ups and other businesses and was founded in 2010 by CEO Adam Neumann. According to its website, WeWork is “committed to elevating the collective consciousness of the world by expanding happiness and unleashing every human’s superpowers.”

The company has turned eyes across Wall Street as it works toward an initial public offering both for its lofty valuation targets as well as for a recent controversy involving Neumann. In July, the We Co. agreed to pay Neumann $5.9 million in stock for the trademark to “We,” previously the property of We Holdings, an investment vehicle run by the CEO and co-founder Miguel McKelvey.

Neumann later returned the stock payment.

Some prominent real estate investors, unfazed by WeWork’s optimism and concerned about the company’s less-than-stellar corporate governance, are less certain.

Sam Zell, who made nearly $6 billion in the commercial real estate business and joined CNBC on Wednesday, slammed WeWork for offering little more than what already exists in the marketplace.

“I had the privilege of investing in this kind of company once before. As a matter of fact, this kind of company began in 1956,” when office subletting emerged, Zell said Wednesday.

“Every single company in this space has gone broke,” he said, pointing to WeWork’s IPO disclosure last month of net losses of more than $900 million for the first six months of 2019 on revenue of $1.54 billion.

WeWork, which rebranded itself as the We Co., has 528 locations with plans to open 169 new locations and said that half of its memberships are based outside the U.S. The Wall Street Journal first reported the lowered valuation.