12 votes

WeWork files for IPO

14 comments

  1. [8]
    NaraVara Link
    I haven't been able to read the whole thing in detail, but after looking over their projections I can't find very much convincing information about what their route to profitability is going to...

    I haven't been able to read the whole thing in detail, but after looking over their projections I can't find very much convincing information about what their route to profitability is going to be. The overall strategy seems to be:

    As we continue to pursue rapid growth, we continue to operate in a state where the majority of our locations are non-mature and have not reached stable cash flow. As of June 1, 2019, only 30% of our open locations were mature, with the remaining 70% of our open locations having been open for 24 months or less. If we stopped investing in our growth and instead allowed our existing pipeline of locations to mature, we would no longer incur capital investments to build out new spaces or the initial expenses associated with driving member acquisition at new locations. Rather, we expect that each mature location would generate a recurring stream of revenues, contribution margin and cash flows. We believe that the flexibility to manage our growth by focusing on our existing pipeline of locations and allowing them to mature presents us with an opportunity to manage our profitability profile.

    Which basically implies their established locations actually turn a profit and once they hit a critical mass and don't need to expand so rapidly they'll stabilize into a viable business model. But then they can't provide numbers around costs of operation and revenue broken down by maturity level to confirm this.

    What's more, almost everything they offer is replicable by any big commercial real estate company once they smarten up on the backend technology.

    Edit: That said, it does at least seem a bit more realistic than Uber and all the "Uber for ___" companies where their only route to profitability is to substantially raise prices while somehow, magically, keeping demand constant.

    5 votes
    1. [6]
      Deimos Link Parent
      I've seen quite a few people say something like WeWork is a real estate company that's being valued like a tech company. Here's some good thoughts about it by Matt Levine from last year. They make...

      I've seen quite a few people say something like WeWork is a real estate company that's being valued like a tech company. Here's some good thoughts about it by Matt Levine from last year.

      They make a lot of lofty statements (like starting their S-1 with "We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness. We have built a worldwide platform that supports growth, shared experiences and true success."), but in the end they're really just renting offices, and that's a pretty thoroughly understood type of business.

      9 votes
      1. [5]
        NaraVara Link Parent
        Oh Lordy Just to get a sense for how cringe-worthy mission statements like this are, here's the mission statement for an organization that is actually committed to the unrealistically lofty,...

        "We are a community company committed to maximum global impact. Our mission is to elevate the world’s consciousness. We have built a worldwide platform that supports growth, shared experiences and true success."

        Oh Lordy

        Just to get a sense for how cringe-worthy mission statements like this are, here's the mission statement for an organization that is actually committed to the unrealistically lofty, pie-in-the-sky goal of human advancement:

        The United Nations Development Programme is the UN's global development network, an organization advocating for change and connecting countries to knowledge, experience and resources to help people build a better life.

        Somehow a non-profit oriented organization explicitly built on ambitious ideals seems to have a more grounded mission statement that connects to its actual day-to-day work than one that leases office space.

        11 votes
        1. [2]
          ascii Link Parent
          Counterpoint: What if WeWork actually does elevate the world’s consciousness through personal growth and shared experiences? What if the way WeWork builds communities both at work and at home is...

          Counterpoint:

          What if WeWork actually does elevate the world’s consciousness through personal growth and shared experiences?

          What if the way WeWork builds communities both at work and at home is genuinely and objectively different than just "renting offices"? Wouldn't that be worth something?

          People want something more from work than just a paycheck, and people want something more from home than just shelter.

          The old way of work is alienating, and changing family and social norms mean home life is lonely and dismal for a lot of people. If the WeWork way can bring more meaning and satisfaction to both work and home, that could be huge.

          5 votes
          1. NaraVara Link Parent
            The point of a mission statement is that when push comes to shove, that mission is your main priority. Does anyone sincerely believe WeWork priorities raising consciousness as their main motivator...

            The point of a mission statement is that when push comes to shove, that mission is your main priority.

            Does anyone sincerely believe WeWork priorities raising consciousness as their main motivator for being in business? The overarching goal that informs all their business decisions?

            What if the way WeWork builds communities both at work and at home is genuinely and objectively different than just "renting offices"? Wouldn't that be worth something?

            From the standpoint of private equity, probably not.

            7 votes
        2. [2]
          Akir Link Parent
          Honestly as I was reading that I was wondering if you had confused it for the front page introduction on a website for a cult.

          Honestly as I was reading that I was wondering if you had confused it for the front page introduction on a website for a cult.

          1 vote
          1. NaraVara Link Parent
            That’s basically the angle a lot of corporate marketing takes these days. I think the modern tech industry has learned all the wrong lessons from Steve Jobs and few of the right ones.

            That’s basically the angle a lot of corporate marketing takes these days. I think the modern tech industry has learned all the wrong lessons from Steve Jobs and few of the right ones.

            4 votes
    2. Deimos Link Parent
      Here's a good post from Shira Ovide at Bloomberg now, who's written a fair amount about them in the past: WeWork IPO Shows It’s the Most Magical Unicorn

      Here's a good post from Shira Ovide at Bloomberg now, who's written a fair amount about them in the past: WeWork IPO Shows It’s the Most Magical Unicorn

      3 votes
  2. nic (edited ) Link
    I wonder what Softbank sees in them? They invested $10.4 billion out of the $12.8 billion into this company. Their S1 claims WeWork is well under half the cost of a traditional lease, which...

    I wonder what Softbank sees in them? They invested $10.4 billion out of the $12.8 billion into this company.

    Their S1 claims WeWork is well under half the cost of a traditional lease, which implies they can hike rates to profitability in a good economy.

    But their enterprise clients are stressing the avoidance of capital expenditure and long term leases, which suggests WeWork is carrying the risk of the long term lease and capital expenditure that might hit them hard during a recession.

    Wework has committed to spending $3 billion a year over the next 15 years. Yet they are burning $6 billion a year. Even if they cut expansion costs they still have to raise rents to achieve profitability. The comment in their S1 about resiliency during a recession and even potential upside during a recession seems to be just asking for a lawsuit.

    Also, the CEO cashing out is not going to help things at all.

    3 votes
  3. [2]
    Deimos Link
    Here's another pretty funny runthrough of some of the highlights of this filing: WeWork isn’t a tech company; it’s a soap opera

    Here's another pretty funny runthrough of some of the highlights of this filing: WeWork isn’t a tech company; it’s a soap opera

    2 votes
  4. Death Link
    Bumping this thread again with this article I found: WeWork IPO filing shows it's losing nearly $5,200 per customer I understand some of the mechanics of how these kinds of companies keep getting...

    Bumping this thread again with this article I found: WeWork IPO filing shows it's losing nearly $5,200 per customer

    I understand some of the mechanics of how these kinds of companies keep getting investors despite not being financially solvent, but does it ring no alarm bells at all when a company is haemorrhaging this much cash in standard operating costs?

    2 votes
  5. Deimos Link
    Another one, from Ben Thompson (Stratechery) who I always think has good insight: The WeWork IPO

    Another one, from Ben Thompson (Stratechery) who I always think has good insight: The WeWork IPO

    1 vote