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WeWork Gets a Visit from Financial Reality

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Re: WeWork Gets a Visit from Financial Reality

#101

Post by code4tee »

dvtrn wrote: post #90
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.

I was trying to be polite and didn’t push it too much, but it was similar to descriptions coming out in the press. They want to run schools, housing and all aspects of your life but as a digital experience.

The gist though was that these were all just existing needed but boring businesses with low valuations. WeWork’s strategy seems to be “but we can run an elementary school and it should command a wild valuation because it’s not a school it’s a WeSchool.” It wasn’t a convincing argument.

Re: WeWork Gets a Visit from Financial Reality

#102

Post by bryanlarsen »

JumpCrisscross wrote: post #68
bryanlarsen wrote: post #25

Earlier quoted context omitted.

I guess the right question is, was a basket containing Amazon.com, pets.com and all the rest overvalued? Amazon is up about 15X since its peak before the crash, the dow is at 3X over the same period. So as long as AMZN was >= 20% of your basket, then it was fairly valued. Sounds about right.

> was a basket containing Amazon.com, pets.com and all the rest overvalued? Yes. This has been extensively studied. Almost every investor who deployed new capital in the late 90s lost money on those investments. > as long as AMZN was >= 20% of your basket You’d have to torture causality to come up with a portfolio that would have made sense in the 90s and would have been 20%+ Amazon. It wasn’t even in the top 10 most…

But it obviously would have been a major component of any "Internet" basket at any date after its IPO in 1997. But 20% major? Perhaps not.

Re: WeWork Gets a Visit from Financial Reality

#103

Post by mi100hael »

kgwgk wrote: post #93

https://www.bloomberg.com/opinion/articles/2019-01-08/wework... "In addition to the corporate finance weirdness: “Going forward, the company will no longer be called WeWork but rather The We Company.” (“The switch is not a legal name change,” okay.) And: “Rather than just renting desks, the company aims to encompass all aspects of people’s lives, in both physical and digital worlds,” which is—and I have spent years w…

When life imitates art: https://en.wikipedia.org/wiki/We_(novel)

Re: WeWork Gets a Visit from Financial Reality

#104

Post by dvtrn »

code4tee wrote: post #101
dvtrn wrote: post #90

Earlier quoted context omitted.

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.

I was trying to be polite and didn’t push it too much, but it was similar to descriptions coming out in the press. They want to run schools, housing and all aspects of your life but as a digital experience. The gist though was that these were all just existing needed but boring businesses with low valuations. WeWork’s strategy seems to be “but we can run an elementary school and it should command a wild valuation bec…

Completely fair. I was just curious because looking at so many of these types of companies that on the face look just like another real estate/cab/hotel (WeWork/Uber,Lift/AirBnb respectively) company but are convinced "no we're %synonym laden description of what a cab company does%", I start to wonder how thoroughly convinced of these descriptions your non-C-level employee is.

Re: WeWork Gets a Visit from Financial Reality

#105

Post by AlexandrB »

rconti wrote: post #81
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…

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).

> Tech allows a company like Uber to allocate rides vastly more efficiently

It's more accurate to say that venture capital allows Uber to subsidize rides more aggressively. I see no evidence that Uber is substantially more efficient (when you include the driver's costs) than traditional taxi companies.

Edit: Uber has also managed to skirt a bunch of labor laws by claiming their employees are contractors. I guess that's a kind of "efficiency".

Re: WeWork Gets a Visit from Financial Reality

#106

Post by casual_slacker »

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…

Amzn (adjusted for splits/etc) had a peak value of $107 in 2000 and a low of $7 in 2001.

Re: WeWork Gets a Visit from Financial Reality

#107

Post by mrnobody_67 »

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.

Chewsie sold for $3.35 billion recently...

Re: WeWork Gets a Visit from Financial Reality

#108

Post by malux85 »

kgwgk wrote: post #93

https://www.bloomberg.com/opinion/articles/2019-01-08/wework... "In addition to the corporate finance weirdness: “Going forward, the company will no longer be called WeWork but rather The We Company.” (“The switch is not a legal name change,” okay.) And: “Rather than just renting desks, the company aims to encompass all aspects of people’s lives, in both physical and digital worlds,” which is—and I have spent years w…

We(are the)Borg

Lower your firewall and surrender your data. We will add your biological and technological distinctiveness to our own. Your culture will adapt to service us.

Resistance is futile

Re: WeWork Gets a Visit from Financial Reality

#109

Post by mrnobody_67 »

jamesash wrote: post #65
_the_inflator wrote: post #13

Earlier quoted context omitted.

I don't agree with the "rubbish part". WeWork single handedly changed the way we work. It is way easier to build a tech startup with the help of a co-working space company than before. I suspect that WeWork's business model ain't the problem but it's competitors, for example in London, UK. Competition drives prices for new real estate, crashed margins.

Regus is valued at about 10k per desk. Wework is valued at about 160k / desk (August 2017 numbers, see Aug 25 2017 WSJ). What does Wework do that Regus doesn't, that accounts for 16x the value?

Free beer?

Re: WeWork Gets a Visit from Financial Reality

#110

Post by benj111 »

rchaud wrote: post #40
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…

Well, back then the capital markets were all about value investing. And if someone in 1999 told you that a publicly traded company could run losses for 15 years straight and be 'successful', you'd have looked at him as though he were a fool. 'Valuation' these days seems to be less about determining the free cash flow of a company's operations. It's the promise of great innovation that's just around the corner. Or, mo…

So we should be contrarian, and move back to value investing again?

I wonder how these profitless companies will fare when the next recession arrives.

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