WeWork Valued at 35 Billion

[UK]

https://www.wsj.com/articles/wework-is-valued-10-times-greater-than-this-profitable-public-rival-11566298801

https://stratechery.com/2019/the-wework-ipo/

 

[Ahab]

Please God, let the IPO succeed so I may short it.

[DTEJD1997]

hey all:

 

Looks like the IPO of WeWork is now in jeopardy.

 

Please see:

 

https://www.zerohedge.com/health/softbank-urges-wework-shelve-its-ipo-its-time-think-unthinkable

 

Could this mark the height of the market?  Especially that of the "Unicorn IPO's"?

[Gamecock-YT]

hey all:

 

Looks like the IPO of WeWork is now in jeopardy.

 

Please see:

 

https://www.zerohedge.com/health/softbank-urges-wework-shelve-its-ipo-its-time-think-unthinkable

 

Could this mark the height of the market?  Especially that of the "Unicorn IPO's"?

 

Vision Fund II to save the day.

[Gregmal]

IPO price keeps sliding.

 

One thing I've wondered, and more so lately, is this.

 

Has anyone here been involved in a funding round or gotten the up close pitch on this?

 

I am super curious because I just have a tremendously hard time reconciling how enormous the valuation gap seems to be between what supposedly sophisticated institutional investors are paying for this, and what common sense and conventional wisdom seem to state based on whats readily out there. Its abnormally perplexing actually.

[Cardboard]

Can't really answer your question Greg but, when it comes to greed, there is very little sophistication.

 

Recall the CEO at Lehman who said that as long as the music plays that you gotta to dance or something like that.

 

 

 

 

[SHDL]

IPO price keeps sliding.

 

One thing I've wondered, and more so lately, is this.

 

Has anyone here been involved in a funding round or gotten the up close pitch on this?

 

I am super curious because I just have a tremendously hard time reconciling how enormous the valuation gap seems to be between what supposedly sophisticated institutional investors are paying for this, and what common sense and conventional wisdom seem to state based on whats readily out there. Its abnormally perplexing actually.

 

I’m not anywhere close to the VC world but I’ve read quite a few reports about how certain parties like SoftBank are distorting the market.  One in particular I think talked about how those guys are acting a bit like hedge funds who are trying to make their short term numbers look good by pumping a little extra money in their illiquid positions and driving up their prices at the end of the month/quarter/year.  In the VC world that is accomplished by doing new funding rounds at higher valuations, but same principle.  Repeat that enough times and valuations can quickly go crazy.  Now I don’t know how common this is but it would certainly seem to explain some of the silly things we’re seeing. 

[SharperDingaan]

Can't really answer your question Greg but, when it comes to greed, there is very little sophistication.

 

Recall the CEO at Lehman who said that as long as the music plays that you gotta to dance or something like that.

 

Not to put ideas in peoples heads  :) ......

 

The short-term money in WeWork/Uber/SoftBank can only be made if the WeWork IPO goes through.

To short any of these you need a material event to sell into, and IDEALLY - option/share-lend/repo markets to offset the risks against.

Give up a 1B+ on the WeWork IPO, and make back double+ on the risk offsets .....

 

SD

 

 

 

[Spekulatius]

I believe that WeWork may well work out to the Enron or Lehman of the next downturn. If that’s the case, it won’t just be WeWork either, there will be a host of similar cases. I also think that SoftBank will be pulled into this, they own crap like WeWork, UBER and seem to have wildly overpaid for ARM semi as well and who knows what else. Mr. Son has been there before, he lost the vast majority of his wealth during the first dot.com bubble but a few smart investment (Alibaba) bailed him out. Luck or skill , this remains to be determined . I don’t think his Vision Fund  co- investors have the stomach for 85% drawdowns. 

[Guest cherzeca]

Can't really answer your question Greg but, when it comes to greed, there is very little sophistication.

 

Recall the CEO at Lehman who said that as long as the music plays that you gotta to dance or something like that.

 

Charles Prince, former ceo of C, who was a former GC

[Guest cherzeca]

I believe that WeWork may well work out to the Enron or Lehman of the next downturn. If that’s the case, it won’t just be WeWork either, there will be a host of similar cases. I also think that SoftBank will be pulled into this, they own crap like WeWork, UBER and seem to have wildly overpaid for ARM semi as well and who knows what else. Mr. Son has been there before, he lost the vast majority of his wealth during the first dot.com bubble but a few smart investment (Alibaba) bailed him out. Luck or skill , this remains to be determined . I don’t think his Vision Fund  co- investors have the stomach for 85% drawdowns.

 

not Enron or Lehman so much as drexel burnham...funding long term assets (leaseholds from building owners) with short term money (short term subleases).  like a hotel, what do you do if the your room occupancy goes down?

[DTEJD1997]

I believe that WeWork may well work out to the Enron or Lehman of the next downturn. If that’s the case, it won’t just be WeWork either, there will be a host of similar cases. I also think that SoftBank will be pulled into this, they own crap like WeWork, UBER and seem to have wildly overpaid for ARM semi as well and who knows what else. Mr. Son has been there before, he lost the vast majority of his wealth during the first dot.com bubble but a few smart investment (Alibaba) bailed him out. Luck or skill , this remains to be determined . I don’t think his Vision Fund  co- investors have the stomach for 85% drawdowns.

 

What will happen is that they will have to lower rates to attract more tenants.  Possibly they will also have to offer more/better spiffs.  Maybe offer free Coke/juice/seltzer water/beverages & snacks to tenants?  Of course, they will probably shut down bad/marginal locations.  So instead of losing a TON of money, they'll be losing money by the TRAINLOAD.

 

If these guys can't make money with hundreds of locations, billions in revenue, AND the economy like it is, WHEN WILL THEY MAKE MONEY?

 

I think the obvious answer is never.  Just a question of how many people they can draw in, how much money insiders can pull out, and how long it goes.

 

not Enron or Lehman so much as drexel burnham...funding long term assets (leaseholds from building owners) with short term money (short term subleases).  like a hotel, what do you do if the your room occupancy goes down?

[UK]

https://www.reuters.com/article/us-wework-ipo-curbs-exclusive/exclusive-wework-considers-dramatic-valuation-cut-in-ipo-idUSKCN1VY12V

[DooDiligence]

Couldn't AirBnB disrupt these guys without taking on risk?

[LongHaul]

I view Wework as total insanity.  Just a quick look at the financial statements with around -100% EBIT margins is nuts.

I guess someone in that company is good at telling and selling a story. 

 

-Massive losses

-No competitive advantage

-High risk business

-Stupid price to pay for Wework

 

I kid you not - I showed Wework's Income statements to my kids and I asked them how much they would pay. Both said  ZERO in about

2 minutes independently.

 

But they don't have an MBA.

 

 

 

 

[Gregmal]

LOL so this is all just proving my point! I don't care if they blow up, or lose money, or cook their books...I just want to know how something like this occurs!

 

Where TF is anyone who sees any value/utility to this as an investment??? It might be fueled by Softbank, but they arent the ONLY ones propping up this valuation(at least to my knowledge). How does this happen? Its a total enigma to me because the consensus for EVERYONE Ive ever talked to thinks this thing is one giant piece of shit.

[Guest cherzeca]

LOL so this is all just proving my point! I don't care if they blow up, or lose money, or cook their books...I just want to know how something like this occurs!

 

Where TF is anyone who sees any value/utility to this as an investment??? It might be fueled by Softbank, but they arent the ONLY ones propping up this valuation(at least to my knowledge). How does this happen? Its a total enigma to me because the consensus for EVERYONE Ive ever talked to thinks this thing is one giant piece of shit.

 

I think WE's model actually makes sense, insofar as they are an intermediary or "underwriter" of office building space.  the current model of leasing agents leasing space with renovation credits is ripe for disruption.  what is crazy is its valuation, and WE has taken on so much leasehold ownership risk that it is hard to see how this survives even a small economic pullback.  but some people like to go big or not at all, and many investors are a sucker for the big sizzle

[LongHaul]

LOL so this is all just proving my point! I don't care if they blow up, or lose money, or cook their books...I just want to know how something like this occurs!

 

Where TF is anyone who sees any value/utility to this as an investment??? It might be fueled by Softbank, but they arent the ONLY ones propping up this valuation(at least to my knowledge). How does this happen? Its a total enigma to me because the consensus for EVERYONE Ive ever talked to thinks this thing is one giant piece of shit.

 

 

There were hundreds or thousands of companies like this in the dot.com bubble.  Growing revenues and huge losses that had minimal scale effects.  It was total insanity.  It was a frenzy though and speculators kept throwing money into it until it all blew up.  Funny enough there are copycats of Wework.  One day the funding window will shut for speculative garbage and many will fail.

 

 

 

 

 

[DTEJD1997]

LOL so this is all just proving my point! I don't care if they blow up, or lose money, or cook their books...I just want to know how something like this occurs!

 

Where TF is anyone who sees any value/utility to this as an investment??? It might be fueled by Softbank, but they arent the ONLY ones propping up this valuation(at least to my knowledge). How does this happen? Its a total enigma to me because the consensus for EVERYONE Ive ever talked to thinks this thing is one giant piece of shit.

 

 

There were hundreds or thousands of companies like this in the dot.com bubble.  Growing revenues and huge losses that had minimal scale effects.  It was total insanity.  It was a frenzy though and speculators kept throwing money into it until it all blew up.  Funny enough there are copycats of Wework.  One day the funding window will shut for speculative garbage and many will fail.

 

I would suggest that there might have been a business model to sell out to WeWork.  If you look at the number of companies they have acquired through the years, it is quite a bit.  Please see:

 

https://pitchbook.com/news/articles/wework-has-acquired-more-than-20-companies-in-the-run-up-to-its-ipo

 

Putting together rented, flexible space is not rocket surgery.  Pretty simple model.

 

 

[SharperDingaan]

LOL so this is all just proving my point! I don't care if they blow up, or lose money, or cook their books...I just want to know how something like this occurs!

 

Where TF is anyone who sees any value/utility to this as an investment??? It might be fueled by Softbank, but they arent the ONLY ones propping up this valuation(at least to my knowledge). How does this happen? Its a total enigma to me because the consensus for EVERYONE Ive ever talked to thinks this thing is one giant piece of shit.

 

This is the NORM, not the exception; and it exists to be used - not shut down.

The vast majority of stock market participants are not 'investing' - they are gambling. Buy high, sell higher, and do whatever you can to keep the bubble going. The industry makes far more money via 'churn' (commissions, fees, underwriting, credit rating, analysts/social media, etc) - than could ever be made through 'buy and hold'.

 

For the most part, HFT and proprietal trading is just zero-sum gaming.

In any given quarter a firm could be up/down quite a bit, but over MANY, MANY quarters? it tends to wash out. The sales benefit is higher market volatilty, and conditional liquidity, promoting higher 'churn'. And all sales people will make a lot more money in a 'hot' market.

 

Play the 'game', the way 'industry' does (gorilla in the room); and you will lose.

But play the game differently, and it is industry that loses (Gladwell, 'David and Goliath'). Lots of opportunities.

 

Bubble investors only 'look' wealthy.

The reality of course is that if they can't reliably dump their sh1t onto a patsy at a higher price, they're bankrupt. To ensure that they can; they engage the industry to sell the bubble, and its handmaidens to sell the individual deals. Add enough 'Benjamins', and you can obscure most anything. Smart approach.

 

However, all bubbles eventually burst ....

Industry's loss becomes your gain, everybody is fire selling everything, and you've the one with the cash. 50c on the offer, for a quick all cash sale; take it or leave it. You only need 1-2 of these in a lifetime, and you're essentially set for life.

 

SD

 

 

 

[vinod1]

Opened the S-1 after reading all the hoopla about WeWork. The first two sentences are:

 

"We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness."

 

For some reason, it reminds me of Sardar Biglari.

 

Vinod

 

[LongHaul]

Interesting last few posts.

 

I guess that sounds better in their S-1 than we rent office space. 

 

BTW - Wework burned ~$2.2b in 2018. and ~$2.9b LTM  as of June 2019.

Wow - that is a lot of dough.

 

And their balance sheet lease liability is $18.4b. 

 

I would think this is a wipeout and the landlords will be holding the unsecured bag.

 

 

Edited for corrections.

 

 

 

[Munger_Disciple]

From S-1 filing:

 

We dedicate this to the energy of We- Greater than any one of us but inside each of us

 

https://www.sec.gov/Archives/edgar/data/1533523/000119312519244329/d804478ds1a.htm

 

WTF??? They are dedicating the S-1 to the energy of We??

 

[rohitc99]

Opened the S-1 after reading all the hoopla about WeWork. The first two sentences are:

 

"We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness."

 

For some reason, it reminds me of Sardar Biglari.

 

Vinod

 

if the current business doesn't work, they can always diversify into weed to achieve their mission  :D

[merkhet]

Opened the S-1 after reading all the hoopla about WeWork. The first two sentences are:

 

"We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness."

 

For some reason, it reminds me of Sardar Biglari.

 

Vinod

 

if the current business doesn't work, they can always diversify into weed to achieve their mission  :D

 

WeHigh?