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The We Company S-1

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Re: The We Company S-1

#141

Post by lordnacho »

danieltillett wrote: post #32
Bluecobra wrote: post #27

Earlier quoted context omitted.

They are going to be screwed when there’s another recession, given that they don’t actually own the office space they rent out. This is a real gem: “Substantially all of our leases with our landlords are for terms that are significantly longer than the terms of our membership agreements with our members. The average length of the initial term of our U.S. leases is approximately 15 years, and our future undiscounted m…

I would say those landlords are going to be in for an even bigger shock.

If WeWork goes broke it's mildly annoying to have to find other tenants, it's true. But it's not like they can't plan for that.

For instance if WeWork goes down, there are still tenants that might want to stay in the building. That's a sensible place to start.

Re: The We Company S-1

#142

Post by wpietri »

srehnborg wrote: post #113
beager wrote: post #50

I’m really disgusted by how much recent tech IPOs inject pitch deck-style garbage into the S-1 filing, especially this one. I’ve always had a great amount of respect for the mediating nature of the S-1’s dry, candid, and ruthlessly honest assessment of business risks, and even though those things are still there, they’re blown out by marketing photos, full-page charts, and branding. This is basically like putting per…

I see this differently. This is a government document, but one that investors will read now and refer back to in the future. Why make it plain boring text when you can spin this document into a reason to invest? This is an opportunity to tell the world who you are. Interested parties read these for a reason. It might as well look how you want it to look, as long as the same necessary content is listed.

You've answered your own question. Spin is manipulation: https://en.wikipedia.org/wiki/Spin_(propaganda)

The theory of well-regulated public markets is that all investors and all seekers of cash are put on an equal playing field. The goal is to maximize public confidence in the markets, which in turn maximizes the total useful investment. If hype becomes dominant, that will reduce overall returns and increase return variability. That in turn will reduce investor confidence, which reduces available capital, which reduces economic growth.

I understand that in the US we spend ~$500 billion a year on commercial manipulation, so it can seem normal. But it doesn't have to be, and maybe it shouldn't.

Re: The We Company S-1

#143

Post by raiyu »

mrcu5 wrote: post #123
bko wrote: post #98

Earlier quoted context omitted.

They're trying to sell it as tech > We have approximately 1,000 engineers, product designers and machine learning scientists that are dedicated to building, integrating and automating the complex systems we use to operate our business

To do what? I'm not too familiar with them but what more do they have other than a website to look at potential spaces with some photos and a description and sign up for one? Maybe process payments as well?

The biggest tech challenge they have is figuring out how many conferences rooms to build out per X number of offices.

Not enough, and you have a huge queue to use them, too many and you have lost office space rental.

Outside of that there isn't much tech to go around.

We used them before they were WeWork, when they were still GreenDesk in Dumbo.

Overall it was great, and it's a great product given the flexibility and move in ready amenities that it provides and if you ever step foot inside of Regus you will immediately notice the difference.

Though now there is a lot of competition from smaller companies and of course I'm sure Regus has stepped up their game in response.

Their growth is amazing, but ultimately it's still a real estate holding company. The same is true for E-commerce. Though their volume is immense, they trade no where near their multiples for revenue as other tech companies given the different margins they have, cyclical sales cycles, and many other factors that make that sector much less attractive than a pure software play in the B2B space.

But looks like we will see how this all plays out.

Really the exposure that Softbank has here is the real worrying issue. It's a massive stake, at a massive valuation, and if this IPO doesn't perform well (and most people think it won't), this maybe a real red blot on their performance.

Re: The We Company S-1

#144

Post by nknealk »

fjp wrote: post #96
nknealk wrote: post #83

The mechanics of deferred rent are fascinating here. They have 2.8 billion of deferred rent on their balance sheet. See note 11 and 17

What exactly is deferred rent and what does it mean for We Company?

Let me try to explain with an example. GAAP requires straight line depreciation of a lease. So if I gave you a 2 year lease on a facility and required a single payment of $1M at the end of the term, you'd account for that as 500K expense in year one, 500K in year 2. In year 1, your cash balance didn't change though right? I only wanted payment in year 2. So you record a 500K deferred rent liability to indicate that the expense has yet to hit your cash balance.

Basically over some set of future years they'll have to pay out 2.8B of cash. But they don't disclose the timing on when those payments come due.

Re: The We Company S-1

#145

Post by wbl »

"Our mission is to elevate the world consciousness". Let it never be said that tech startups were not very Californian.

Re: The We Company S-1

#146

Post by raiyu »

phyalow wrote: post #20
batmenace wrote: post #9

Earlier quoted context omitted.

Profitability and the value of the equity aren't necessarily related, though. Amazon was unprofitable for many years, but its stock still increased in value.

Thats because Amazon was only unprofitable due to Capex and R&D. Their operating margin is fantastic, it was this promise that enticed investors! WeWork on the other hand is very ugly.

Very true which is why they focused on free cashflow as a measure of profitability which could be immediately realized if they stopped investing their profits in to growth and market domination.

Though, certainly AWS has been a massive benefit for them. Allowing them to truly be disruptive and industry leading while generating massive revenues, growth, and most importantly profitability, however small compared to their overall revenue, to continue to justify their pitch.

Re: The We Company S-1

#147

Post by nwsm »

impalallama wrote: post #117
JumpCrisscross wrote: post #78

Earlier quoted context omitted.

> they’re blown out by marketing photos, full-page charts, and branding Companies get a lot of latitude with the first few pages. Seasoned S-1 skimmers peruse that stuff, but save the digging in for the risk factors, financials and the accompanying notes.

Lmao, pages 157-160 are straight up magazine-esq full page adds for other companies (SalesForce, DropBox, etc)

147-150

Re: The We Company S-1

#148

Post by jerf »

ghaff wrote: post #92
JumpCrisscross wrote: post #80

Earlier quoted context omitted.

> Is this how these things are usually calculated? Yes, it’s a run-of-the-mill back-of-the-envelope TAM [1] estimate. The point of this number isn’t to value the company. It’s to identify obvious limits to scaling. [1] https://en.m.wikipedia.org/wiki/Total_addressable_market

> It’s to identify obvious limits to scaling. In my experience, it's more likely in order to show an enormous number as a way of telling investors, the executives you need to approve your product/project, etc. that your thing has just incredible potential. It has some value. If the TAM isn't very big and you'd have to achieve 50% of it to ever turn a profit, that may be a red flag. But TAMs that lead to business proj…

Even a nobody likes me knows to take TAM estimates with a grain of salt, so I imagine experienced investors know too.

I suspect if you added up all the TAM estimates for all the industries on Earth you'd get a number somewhere north of 10x the actual total value of the markets on Earth. I feel I'm being conservative; I really wanted to say 50x, but chickened out at the last minute before posting.

Re: The We Company S-1

#149

Post by i_am_nomad »

AJ007 wrote: post #124
beager wrote: post #50

I’m really disgusted by how much recent tech IPOs inject pitch deck-style garbage into the S-1 filing, especially this one. I’ve always had a great amount of respect for the mediating nature of the S-1’s dry, candid, and ruthlessly honest assessment of business risks, and even though those things are still there, they’re blown out by marketing photos, full-page charts, and branding. This is basically like putting per…

It can also serve as a major red flag, when a company adds in a bunch of unnecessary things while excluding things that aren’t required, but are critical, to valuations such as churn rates. This was a big one in Uber’s filings where it looked like they were probably mixing in Uber Eats to hide flat or declining usage of the actual ride sharing service. Public companies changing how something has been historically rep…

Or pull a Groupon and just completely redefine several accounting concepts, e.g. list marketing costs as capital expenditures.
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