WeWork went from a $47B Valuation to talk of bankruptcy in just 6 weeks - Article in link below - What are your thoughts?
https://www.businessinsider.com/weworks-nightmare…
Would love to hear your thoughts on WeWork's overexpansion and business model in light of the huge concerns about the company's performance
It's pretty simple, they needed the cash from the ipo to fund their burn.
My thoughts are that I've seen this shit coming and so have a lot of people.
Second this. I'm very surprised by the round of reports in late September that seem to act like it just became news that WeWork's model was questionable. Feels very twilight zone, like wasn't this an open secret for years?
Especially that article in Medium ("Is WeWork a Fraud?") that much of my LinkedIn network forwarded around like a hot potato last week. It's like, hey Mr. Reporter, late to the party much? What're you working on next, a hard-hitting investigative piece on Theranos?
Yep, WSO has threads going back years with commenters noting the shortcomings of the business model.
I'm imagining a scene where in one room sits the WeWork team in Joseph A. Bank suits as we all know they have no class and in the other room seasoned investors rocking the latest Hermes tie. WeWork tells the messenger to start the negotiation at a $100 ($46 billion valuation) per share. In the other room, the investors smile and say no. The messenger goes back and forth for a few more rounds. In conclusion, the investors are pretty happy that the WeWork team was willing to drop to $22 per share ($10 billion valuation). Just as the exhausted messenger is about to bring the good news to the WeWork team. The oldest and shrewdest investor in the room says, make Adam sweeten this deal. In hearing the news, Adam says he will give anything to get it done: (i) lower his voting rights, kick his wife off the succession plan (sorry boo), drop ancilary business lines and if necessary drop to his knees. (Pause: Adam went from smoking joints on private jets to on his knees begging).
Finally, as Adam goes in for the handshake, Masa, comes flying across in a ninja-like manner to kick the bowl out of Adam's mouth. Before Adam can say anything, Masa scolds Adam and brings him back Tokyo before the entire SoftBank charade collapses.
I don't know anyone in the commercial real estate industry that is surprised by this. Pretty much everyone has been talking about how they're a sham for at least a year or two.
What business model? You could take literally any person on the planet and set them loose if the only objective is to lose more money than you make and never have a clear path to profitability.
I think we need to be careful when using the term business model. When I used business model I meant by definition 'how an organization creates, delivers, and captures value; as in WeWork's case it does so by locking in long-term leases and then re-leasing that space to other businesses at a premium (forgive me for being obvious, just trying to distinguish the matter). To your point, you're describing how a company allocates its resources which is on the subject matter of management. Why do I point this out? because the co-working business model is not flawed - WeWork overleveraged and overexpanded, completely mismanaged. Knotel (a WeWork competitor) just secured $400M. See link below if interested. https://techcrunch.com/2019/08/21/workspace-provider-knotel-secures-400…
I was being facetious, obviously, but you bring up a good point. Is Knotel profitable? The fact that they just secured funding means nothing - so did WeWork, for years.
It has been fascinating to watch this implosion over the past few months. Now projected to be out of cash by first quarter of 2020 at current burn rate of ~$700M per quarter and $2.5B in cash at end of June https://www.wsj.com/articles/wework-faces-cash-needs-as-botched-ipo-scu…
Sooo close to pulling one off on investors. And they would’ve gotten away with it if it wasn’t for you meddling kids.
Massive scam that hired bottom barrel people in management roles
I lease from Regus. They have been in the co-working space probably longer than anyone I can think of. I wonder how they're doing. My La Jolla office is great. They provide a ton of services to me that help offset the lease payment. They offer a fairly impressive space and vibe but seem to have solid control over expenses and where they spend their money.
I recently asked the leasing folks how the La Jolla office is doing. She said they are 87% occ. To me that seems really strong. The only vacancies are suites like mine that have an ok view. I pay $1410mo for a 120sqft space with a view of Prospect and Fay Ave...the heart of The Village. The ocean view offices that are about 300sqft are $4000mo+. These are usually shared by at least 2 people.
And that's exactly how WeWork should be valued - like Regus.
Not to mention that Hines, Boston Properties, etc. are all doing their own in-house co-working platforms these days.
"the company began considering such unthinkable options such as slowing its growth, cutting thousands of employees to focus on its core business of renting office space, and getting rid of side businesses such as Rebekah Neumann's school to control costs and — perhaps — restore investor confidence."
It's not much, but it's honest work.
Don't forget selling the G650-ER... Hate to see that go
Reminds me of a deal I got myself into a few years back where I invested into the real estate project only to find out that I was bailing out prior investors, and I got stuck with the hot potato. Looks like the public market dodged a bullet in a way I missed out on in my real estate investment.
As an aside, I personally hate We Company because I abhor the spiritualist/new age horsesh*t of the now-former CEO. I also hate how he became a billionaire off of creating a company that makes no money and will never make a penny. If there was any justice, the guy and his freak wife would be homeless.
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