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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

#131

Post by TazeTSchnitzel »

randomsearch wrote: post #127
School-Cotton wrote: post #103

Earlier quoted context omitted.

Even if that’s true, why should it bother you that money is being extracted from rich VCs and distributed to other rich people in the worst case, and working- and middle-class employees and customers in the best case?

Aren’t the rich VCs cashing in on the IPOs and letting the markets take the losses? Classic bubble behaviour - pay plenty so long as someone else will pay more.

Sort of like a ponzi scheme requiring a constant inflow of cash, where those who get out earlier are fine and the rest lose?

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

#132

Post by Illniyar »

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…

What do you think about WeWork's recent attempts at gaining traction with big corporations[0]?

[0] - https://www.curbed.com/2019/3/26/18280774/wework-real-estate... for instance

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

#133

Post by dalbasal »

Control/ownership/structure aside, the interesting line here is:

"The financial disclosures make it clear that WeWork — which, it should be said, is a commerce office leasing company and not truly a tech company"

Lots of tech companies (eg uber) take VC funded losses to grow at tech startup rates. This can create unsustainable business models and mask sustainability issues. But...

..But, in tech, the potential payoff driving all this investment flow is getting to a monopoly (in the Thiel sense). Out of this world business models like Google's or FB's that generate massive revenue with near-zero marginal costs. Software economics, basically. The winners win incredibly big. This makes the massive-multiple investment case rational.

Tesla, WeWork and such have much more normal, non-software-like economics. WeWork will never lease office space for that much above market rates. No matter how good Tesla's cars and/or manufacturing tech gets, they are never going to sell cars at a 40% margin^. That's why Elon had to sell all the Tesla share and take loans. It takes a lot of resources to build factories and cars. Office space can be leased, so WeWork hasn't needed as much financing, but it comes out of operating margins instead.

You basically cannot achieve software startup money-machine goals with atoms and marginal costs.

^Self-driving aside.

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

#134

Post by nradov »

bcherny wrote: post #93
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…

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.

Global real estate markets are increasingly correlated so that geographic diversification no longer benefits a portfolio very much.

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

#135

Post by nradov »

themagician wrote: post #122
mikeg8 wrote: post #105

Earlier quoted context omitted.

I’ve never understood this point of view. Shouldn’t every investor, regardless of scale, bear responsibility for their investments? If by small investors you mean regular employee 401Ks, controlled by the wealth management division of a bank, with a heavily diversified portfolio, that is still a risk the “investor” may be fine accepting. I don’t really feel bad for anyone losing money when they actively put it into a…

The thing is that most people don’t know what they are doing. The 401(k) is the only retirement program we have. At the end of the day when companies go public and then go bust the money is often coming from the collective public in some way. You are right, it’s a very small detail. But it’s one of those cogs that turn while making the rich richer by extracting value from the public. The founder of this company is a…

In most 401(k) plans the default funds don't invest in IPOs. Most workers and retail investors have no exposure here.

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

#136

Post by chx »

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…

>> 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

Being a digital nomad is fun for a few years and then you want to settle to have relationships. Humans are social animals. This is unavoidable. Also, people want possesions, most people want to have their own touch on their own places because it makes them feel better. Home, sweet home is not just a place where you store your off season clothing.

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

#137

Post by tomhoward »

Illniyar wrote: post #132
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…

What do you think about WeWork's recent attempts at gaining traction with big corporations[0]? [0] - https://www.curbed.com/2019/3/26/18280774/wework-real-estate... for instance

It's what they have to do.

It's the only way to get tenants that will stick around long-term, thus solving the retention problem.

With this in mind, I can see their approach being to offer a Google/Facebook-like full-service campus-style workplace, but for companies that are way too small to provide this themselves.

We'll see if it works!

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

#138

Post by elmomle »

fastball wrote: post #99
throwawaytoday5 wrote: post #95

Earlier quoted context omitted.

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.

But he gets to keep the money that they paid him for the buildings.

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

#139

Post by cm2187 »

tomatocracy wrote: post #46
lifeisstillgood wrote: post #39

The City of London is having a skyscraper boom at the moment - two major 100+ floor buildings are going up and you can hardly turn a corner without some crane or building work going on. I personally (and without any empirical evidence) think that there is no way London needs this much more office space, partly because "Brexit China Tariffs", but mostly because remote working and "just not in the office five days a we…

Sorry to disappoint you but I'm not sure I agree here. It doesn't feel much different to 2006/07 - ie peak of the cycle in real estate for the City (not to say that I think the bust will be like 2008/09 but that I think there really is a clearly cyclical element to it). The City is not a place families typically want to live because it has very little green space - and it's largely not a place marketed to families. H…

Plus I believe the City of London has a policy of avoiding owner occupied apartments blocks. Once a building is owned by 600 people, there is no way you can buy it, demolish it to build something more adapted to the new demand.

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

#140

Post by tomatocracy »

cm2187 wrote: post #139
tomatocracy wrote: post #46

Earlier quoted context omitted.

Sorry to disappoint you but I'm not sure I agree here. It doesn't feel much different to 2006/07 - ie peak of the cycle in real estate for the City (not to say that I think the bust will be like 2008/09 but that I think there really is a clearly cyclical element to it). The City is not a place families typically want to live because it has very little green space - and it's largely not a place marketed to families. H…

Plus I believe the City of London has a policy of avoiding owner occupied apartments blocks. Once a building is owned by 600 people, there is no way you can buy it, demolish it to build something more adapted to the new demand.

I'm not sure that's true, and in any case they can't really enforce that - if a building owner wants to sell individual units, they can sell them.

The obvious counterexample to your point is the Barbican. Much of the Barbican is owner occupied and the vast majority of the flats there are privately owned (ie not local authority/housing association). I'm not sure but I think the Barbican still houses the majority of residents of the City proper.

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