China's version of WeWork stumbles on road to IPO as big banks drop out

Citigroup (C) and Credit Suisse (CS) have dropped out of the startup's initial public offering in the United States, a person familiar with the matter told CNN Business.

Ucommune had named the two high-profile Wall Street banks as leading the planned IPO in filings with the US Securities and Exchange Commission. But in a new filing released Wednesday, Ucommune named Hong Kong banks Haitong International and China Renaissance as lead underwriters.

Citigroup and Credit Suisse walked away from the IPO because they baulked at the valuation Ucommune was targeting, Reuters reported, citing sources with direct knowledge of the matter.

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A spokesman for Ucommune declined to comment. Citigroup and Credit Suisse also declined to comment.

Ucommune was last valued at $3 billion in April and backed by investors such as Alibaba-affiliate (BABA) Ant Financial and Chinese property and real estate firms Dahong Group and Junfa Group, according to CB Insights.

The IPO attempt comes just a few months after WeWork scrapped its highly anticipated stock market debut. Investors questioned WeWork's sky-high valuation, staggering losses and management practices under company cofounder and former CEO Adam Neumann.

Japanese conglomerate SoftBank (SFTBF) ended up bailing WeWork out with a $9.5 billion rescue plan that valued the company at $8 billion, far lower than its peak of $47 billion.

Like WeWork, Ucommune is burning through cash. The company said in its regulatory filing earlier this week that it has incurred "significant losses" because it has to spend a lot of money to grow the business, including opening new spaces and redeveloping existing ones. Ucommune operates nearly 200 coworking spaces in about 40 cities throughout China. It also has a few locations in Singapore.

Ucommune said it has suffered net losses and "experienced significant cash outflow" since its founding in 2015. For the nine months ended in September the company said it lost 572.8 million yuan (around $80 million).

Unlike WeWork, Ucommune was founded by an experienced real estate developer. Mao Daqing was a former executive with Vanke and CapitaLand, two of China's most profitable property developers.

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