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WeWork IPO Shows It's the Most Magical Unicorn

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Re: WeWork IPO Shows It's the Most Magical Unicorn

#91

Post by tomhoward »

erikpukinskis wrote: post #89
tomhoward wrote: post #86

Earlier quoted context omitted.

> So, does scale lend _any_ benefit? Certainly the "network" of locations might help...but what % of tenants are really and truely jet-setters off to many major cities, versus those that stay close to home and just need a regular space out of the house. I don't think scale is that vital in this view. Spot on here. They are building for a world in which everyone is location-and-asset-independent. Don't need a car beca…

> Don't need a home as we have Airbnb. Don't need an office as we have WeWork. Etc. > But the market of people who live that way is [A] still small, and [B] will always be somewhat small I agree with A, but not B. To me this is a classic disruptive tech scenario. Right now living in hotels and working in coffee shops is strictly worse than having a home and an office for almost everyone. A few people who have very sp…

> I agree with A, but not B.

Yep, fair enough, and that's (part of) the bet WeWork is making and is what we'll watch play out over the coming years/decades. I don't feel strongly either way, I'm happy to wait and see.

Re: WeWork IPO Shows It's the Most Magical Unicorn

#93

Post by bcherny »

jngreenlee wrote: post #77
tomhoward wrote: post #69

I have a bit of knowledge of the co-working industry. I’m good friends with the founder of the first and long-dominant tech/creative co-working space in my Australian city, and I served on its advisory board in the past couple years, through what turned out to be a distressed sale of the business to its landlord, after it became insolvent and unsalvageable. There are several fundamental flaws with the concept that ma…

I really like your analysis here and it made me think. Ultimately, for control of many of these issues, a localist approach is superior..understand the local culture, etc. Maybe a coworkery in La Jolla would have surfboard racks and a tacit understanding that surfing comes first...so allowance for wet gears (and showers) might be needed. Maybe a location in Boulder has community climbing gear and/or a bouldering wall…

Like any big, multi city real estate broker, the benefit of scale is diversification over local real estate markets, and less risk.

A single WeWork in one city is risky due to fluctuations in real estate, economics, labor supply, competition, etc. a thousand locations are less risky, since the company can still exist even if a local market tanks for a year.

Re: WeWork IPO Shows It's the Most Magical Unicorn

#94

Post by kingkawn »

tomhoward wrote: post #69

I have a bit of knowledge of the co-working industry. I’m good friends with the founder of the first and long-dominant tech/creative co-working space in my Australian city, and I served on its advisory board in the past couple years, through what turned out to be a distressed sale of the business to its landlord, after it became insolvent and unsalvageable. There are several fundamental flaws with the concept that ma…

I worked at an early non-profit coworking space in nyc back in 2005 and we also experienced every single one of the problems you mentioned in endless supply. How to make enough money to cover program costs coupled with high turnover and lots of people either succeeding out early or failing out after months of not paying rent both happened regularly. We had institutional support so could weather the costs, but the idea of it being self-sustaining given the economics was a big lift. we were always approaching something like success but never quite reaching it for the reasons you listed.

Re: WeWork IPO Shows It's the Most Magical Unicorn

#95

Post by throwawaytoday5 »

tomhoward wrote: post #52
qsymmachus wrote: post #38

WeWork's business model makes more sense when you realize it's probably just a scheme for transferring VC money directly into Adam Neumann's pocket. He owns a number of the buildings that WeWork is leasing: https://www.bizjournals.com/sanjose/news/2019/01/16/wework-c...

No longer true; he transferred them to a fund owned by the company: https://www.businessinsider.com.au/wework-ark-fund-to-buy-co...

I don't mean to be facetious but how does that make it better? Doesn't he still control the company that owns the fund?

Is it suppose to be better because it "looks" better because with my minimal understanding there isn't a difference.

Re: WeWork IPO Shows It's the Most Magical Unicorn

#96

Post by deckard1 »

erikpukinskis wrote: post #89
tomhoward wrote: post #86

Earlier quoted context omitted.

> So, does scale lend _any_ benefit? Certainly the "network" of locations might help...but what % of tenants are really and truely jet-setters off to many major cities, versus those that stay close to home and just need a regular space out of the house. I don't think scale is that vital in this view. Spot on here. They are building for a world in which everyone is location-and-asset-independent. Don't need a car beca…

> Don't need a home as we have Airbnb. Don't need an office as we have WeWork. Etc. > But the market of people who live that way is [A] still small, and [B] will always be somewhat small I agree with A, but not B. To me this is a classic disruptive tech scenario. Right now living in hotels and working in coffee shops is strictly worse than having a home and an office for almost everyone. A few people who have very sp…

> Right now living in hotels and working in coffee shops is strictly worse than having a home and an office for almost everyone

Maybe it's just the WeWork I've been it, but it was every bit as loud and distracting as a Starbucks. The glass fishbowl offices constantly remind you other people are walking around you. You see them, they see you. In addition, the one I was in had the bright idea of installing hardwood floors everywhere. Men and women in dress shoes and high heels would "clop clop clop" all day long.

You also never want to mix sales people with engineers. Or any job title that requires a good percent of the day socializing. Sales people are on the phone nonstop, usually running a script quite loudly. That's not even something you could get away with at most Starbucks. But WeWork on the other hand...

Re: WeWork IPO Shows It's the Most Magical Unicorn

#97

Post by fastball »

tomhoward wrote: post #86
jngreenlee wrote: post #77

Earlier quoted context omitted.

I really like your analysis here and it made me think. Ultimately, for control of many of these issues, a localist approach is superior..understand the local culture, etc. Maybe a coworkery in La Jolla would have surfboard racks and a tacit understanding that surfing comes first...so allowance for wet gears (and showers) might be needed. Maybe a location in Boulder has community climbing gear and/or a bouldering wall…

> So, does scale lend _any_ benefit? Certainly the "network" of locations might help...but what % of tenants are really and truely jet-setters off to many major cities, versus those that stay close to home and just need a regular space out of the house. I don't think scale is that vital in this view. Spot on here. They are building for a world in which everyone is location-and-asset-independent. Don't need a car beca…

WeWork is planning for the future, when we'll have instant teleportation between cities (obviously).

Re: WeWork IPO Shows It's the Most Magical Unicorn

#98

Post by lumost »

erikpukinskis wrote: post #89
tomhoward wrote: post #86

Earlier quoted context omitted.

> So, does scale lend _any_ benefit? Certainly the "network" of locations might help...but what % of tenants are really and truely jet-setters off to many major cities, versus those that stay close to home and just need a regular space out of the house. I don't think scale is that vital in this view. Spot on here. They are building for a world in which everyone is location-and-asset-independent. Don't need a car beca…

> Don't need a home as we have Airbnb. Don't need an office as we have WeWork. Etc. > But the market of people who live that way is [A] still small, and [B] will always be somewhat small I agree with A, but not B. To me this is a classic disruptive tech scenario. Right now living in hotels and working in coffee shops is strictly worse than having a home and an office for almost everyone. A few people who have very sp…

While I could imagine a world where it is equal cost/quality to live a nomadic lifestyle or a fixed lifestyle - I'm dubious of the claim that most would prefer it as the risk profile is inherently higher than a fixed location and all else being equal people will prefer a lower risk living situation.

Re: WeWork IPO Shows It's the Most Magical Unicorn

#99

Post by fastball »

throwawaytoday5 wrote: post #95
tomhoward wrote: post #52

Earlier quoted context omitted.

No longer true; he transferred them to a fund owned by the company: https://www.businessinsider.com.au/wework-ark-fund-to-buy-co...

I don't mean to be facetious but how does that make it better? Doesn't he still control the company that owns the fund? Is it suppose to be better because it "looks" better because with my minimal understanding there isn't a difference.

I mean, it is different / better.

Now, if WeWork goes belly up, Neumann doesn't get to keep the buildings.

Re: WeWork IPO Shows It's the Most Magical Unicorn

#100

Post by tomhoward »

throwawaytoday5 wrote: post #95
tomhoward wrote: post #52

Earlier quoted context omitted.

No longer true; he transferred them to a fund owned by the company: https://www.businessinsider.com.au/wework-ark-fund-to-buy-co...

I don't mean to be facetious but how does that make it better? Doesn't he still control the company that owns the fund? Is it suppose to be better because it "looks" better because with my minimal understanding there isn't a difference.

His personal ownership was a problem as it created a conflict of interest between his personal property assets the the company, so you have scenarios where he is engaging in related party transactions [1], i.e., potentially entering into lease agreements at above-market rates, to benefit himself personally, and (as the sibling commenter pointed out), having highly valuable property assets, funded by company loans, that remain in his personal ownership even if WeWork goes out of businesses.

When the company owns the properties, that ceases to be the case, as there is no conflict of interest between property owner and occupier as they are one and the same.

He is (and was) still always legally obliged to act bona-fide in the interest of the company (i.e., act as much for the benefit of minority shareholders as his own).

It was just harder to scrutinise when he was both the majority shareholder of the company, and landlord for some of its properties. That is no longer the case.

[1] https://en.wikipedia.org/wiki/Related_party_transaction

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