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WeWork Gets a Visit from Financial Reality

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Re: WeWork Gets a Visit from Financial Reality

#81

Post by rconti »

scandox wrote: post #5
Traster wrote: post #4

>The Gulf investors backing the Vision Fund seem to have decided that WeWork is not a tech bet but simply an aggressive punt on real estate. This is the bogey man of a huge number of current 'tech startups' - What if it turns out Tesla really are a car company! Or if We Work are actually an office rental company! OR gasp Uber is a cab company! (1) We now have a glut of companies operating in traditional markets that…

In 1999 there was an email going round about how ridiculous dotcom valuations were. Taking Amazon, I think, as an example it said it would have to earn more than Kodak, Boeing, Caterpillar etc to ever be worth it's valuation. There was a general sense of "it's just a bookstore". Now I know everything is more mature and the situation is different, but I also remember feeling very confident that Amazon was waaay overva…

Sometimes it's different, sometimes it's not. Tech allowed a company like Amazon to scale. Tech allows a company like Uber to allocate rides vastly more efficiently, tech allows a company like AirBnB to enable property owners to extract more value from their property. But tech doesn't allow Tesla to sell 10x more cars than Toyota (for example).

Re: WeWork Gets a Visit from Financial Reality

#82

Post by wuliwong »

zwkrt wrote: post #7
scandox wrote: post #5

Earlier quoted context omitted.

In 1999 there was an email going round about how ridiculous dotcom valuations were. Taking Amazon, I think, as an example it said it would have to earn more than Kodak, Boeing, Caterpillar etc to ever be worth it's valuation. There was a general sense of "it's just a bookstore". Now I know everything is more mature and the situation is different, but I also remember feeling very confident that Amazon was waaay overva…

Pets.com was also overvalued, right? It's easy to see the winners in hindsight.

It went out of business in 2000 so I guess any valuation over zero turned out to be too high?

Re: WeWork Gets a Visit from Financial Reality

#83

Post by whalesalad »

sachinprism wrote: post #9

I feel like WeWork would be one of the first companies to go under in case a recession hits the US market. Everyone who works there is probably going to decide en masse that they can do the same things from home or a Starbucks

We (2 of us, expected to grow to 4 quickly) toured WeWork, Spaces (Regus) and a few other one-off spots here in Orange County. Everyone was pretty pricey, like 2500/mo for 100 square feet. WeWork was definitely the worst and was the most overcrowded... but hey they have beer on tap! (sarcasm)

Ultimately we grabbed a lease on Pacific Coast Highway with a sweeping view of the ocean for less with about 3x the room in a freshly renovated building.

These coworking spaces are terrible.

Re: WeWork Gets a Visit from Financial Reality

#84

Post by zrobotics »

JumpCrisscross wrote: post #71
zrobotics wrote: post #47

Earlier quoted context omitted.

What sort of moat does Uber have, though? Sure, it was a slight annoyance to sign up for lyft when they moved into the city my mom lives in, but that was ~5 minutes of annoyance and some phone data. I don't care at all about Uber, there's very little customer loyalty. How will they defend their valuation if the self driving project doesn't pan out?

> How will they defend their valuation if the self driving project doesn't pan out? They’re already profitable in New York and San Francisco.

Profitability doesn't mean defensible though. What separates them from their competitors? That is the point I'm making, not that they are unprofitable.

Re: WeWork Gets a Visit from Financial Reality

#85

Post by lsc »

zrobotics wrote: post #49
dazc wrote: post #45

Earlier quoted context omitted.

I tried using a Regus space the other week. It didn't seem that much better than any other co-working space in regards to noise and bad manners?

Have you been in a WeWork office, though? IME all shared offices are incredibly noisy, I don't understand why anyone would want to rent there.

but that's pretty true of all tech offices I've been to in the last few years. Even FAANG companies where they're paying their engineers a lot.

Over time, it seems like I'm getting less and less noise dampening... my last office, they had these little fabric cardboard deals they clipped to the edge of the desk... before that, I worked at smaller places, where there were a few people per office, and before that, I worked at a large place that gave us full cubes.

But at this office? nothing. nothing in between me and the person in the desk across from me. I had facilities put in a whiteboard between us, 'cause while I can wear hearing protection for noise; accidental eye contact is just not okay.

These aren't junior people, these aren't low-paid people; I don't think it's about saving money; or, cramming us in might be about saving money, but leaving out the partitions isn't. They give us really nice, expensive sit/stand desks that would demolish the cost of partitions.

(That said, most of the places I've worked at the very least had fabric coverings on the floor, and often those noise dampening ceiling hanging things... but I personally think that partitions are important, and those have gone the way of the dodo)

Re: WeWork Gets a Visit from Financial Reality

#86

Post by coldcode »

zwkrt wrote: post #7
scandox wrote: post #5

Earlier quoted context omitted.

In 1999 there was an email going round about how ridiculous dotcom valuations were. Taking Amazon, I think, as an example it said it would have to earn more than Kodak, Boeing, Caterpillar etc to ever be worth it's valuation. There was a general sense of "it's just a bookstore". Now I know everything is more mature and the situation is different, but I also remember feeling very confident that Amazon was waaay overva…

Pets.com was also overvalued, right? It's easy to see the winners in hindsight.

Pets went out of business trying to ship heavy dog food for free. But today the logistics for that actually exists. Often it doesn't pay to be too early. If you are too early you need more cash to stick around until you are proven right. Webvan was another example, today food shipping businesses are everywhere (whether they make money or not one can argue) but back then they were too early and tried too hard before the logistics worked.

Re: WeWork Gets a Visit from Financial Reality

#87

Post by darawk »

fhbdukfrh wrote: post #31
scandox wrote: post #5

Earlier quoted context omitted.

In 1999 there was an email going round about how ridiculous dotcom valuations were. Taking Amazon, I think, as an example it said it would have to earn more than Kodak, Boeing, Caterpillar etc to ever be worth it's valuation. There was a general sense of "it's just a bookstore". Now I know everything is more mature and the situation is different, but I also remember feeling very confident that Amazon was waaay overva…

That's pretty revisionist as to the actual reality. The vast majority where incredibly overvalued internet plays on traditional markets, exactly what the gp warns. You just picked one of the few that survived and thrived. Don't overestimate how inevitable it was that we ended up with the Amazon we see today. The biggest difference I see this time is these unicorns have actual revenue. Heavily subsidized but revenue s…

It's not revisionist. The problem is identifying which ones will survive ex ante. Given 100 assets to invest in, if you knew that one of them would become amazon in 20 years, but the other 99 would die, how do you value them? Well, you value all 100 at 1/100th the expected value of Amazon. Now, maybe you look at each individual company and try to pick a winner to put all your arrows behind, but assuming you can't reliably do that (which is a reasonable assumption), you would want to value all 100 at quite a bit more than they currently appear to be worth.

Re: WeWork Gets a Visit from Financial Reality

#88

Post by dcole2929 »

mcguire wrote: post #63
simias wrote: post #56

Earlier quoted context omitted.

Hindsight is 20/20. Maybe people in 1999 were wrong about Amazon but they were right about Pets.com and many others, your comment is just an example of survivorship bias. I mean, I'm sure you're not trying to argue that dotcom valuations weren't generally ridiculous. Besides, Amazon, Kodak and Boeing were never exactly in the same market. The parent is comparing companies that ostensibly offer similar services. If I…

On the other, other hand, Amazon sends currently very overvalued as a retail company. (I haven't looked at the comparative sizes of its various components.) How long before Amazon sounds of its retail business?

Amazon hasn't been just a retail company in a very long time. It is probably THE Tech company at this point. They are a consumer electronics company having cornered the market on the cheap android tablet, and the smart speaker. They are a dominant enterprise cloud player. They own the biggest player in e-sports currently with twitch. They are in the music and video streaming business. They do government contracting at this point. The valuation is more than justified.

Re: WeWork Gets a Visit from Financial Reality

#89

Post by achillesheels »

scandox wrote: post #5
Traster wrote: post #4

>The Gulf investors backing the Vision Fund seem to have decided that WeWork is not a tech bet but simply an aggressive punt on real estate. This is the bogey man of a huge number of current 'tech startups' - What if it turns out Tesla really are a car company! Or if We Work are actually an office rental company! OR gasp Uber is a cab company! (1) We now have a glut of companies operating in traditional markets that…

In 1999 there was an email going round about how ridiculous dotcom valuations were. Taking Amazon, I think, as an example it said it would have to earn more than Kodak, Boeing, Caterpillar etc to ever be worth it's valuation. There was a general sense of "it's just a bookstore". Now I know everything is more mature and the situation is different, but I also remember feeling very confident that Amazon was waaay overva…

Include me in the same boat, but that was many years before I learned value investing and fundamentally analysis of equities. One of which is gross margin analysis.

Amazon, despite losing money, had very competitive gross margins from day one. I think pets.com was literally losing money on every product they sold (but don’t quote me), which is not sustainable.

Re: WeWork Gets a Visit from Financial Reality

#90

Post by dvtrn »

code4tee wrote: post #36

It will be interesting how this all plays out. WeWork’s model wasn’t new (Regis has been doing real estate subdivision arbitrage for years) they just made that model cooler and added some free beer and a few other perks but it’s still the same business. Someone from WeWork recently told me they are a digital experiences company and not a real estate company. Increasingly the market seems to be calling BS on that. The…

Someone from WeWork recently told me they are a digital experiences company and not a real estate company.

Did you ask them what this meant, or did the conversation effectively die there? I'd be curious to hear straight from the horse's mouth what the horse thinks 'digital experiences company' means.

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