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WeWork Isn’t a Tech Company

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Re: WeWork Isn’t a Tech Company

#81

Post by polygotdomain »

secabeen wrote: post #70
polygotdomain wrote: post #66

Earlier quoted context omitted.

Each WeWork office has an SPE that's just for that lease. Every landload wants WeWork on the lease, but won't get it, as WeWork tends to have significant leverage with either the space that they're going after or the desire to have WeWork on the rent roll. When things are booming, WeWork is advantageous for landlords, and appraisers/the market/potential buyers will underwrite that space positively. However, there's m…

Are those SPEs durable against legal challenges that pierce the veil and eliminate the protections for We?

It's not an uncommon business practice to have SPEs for ventures like this. In fact, nearly each of our investments were backed by SPEs that held the property. If you had some sort of evidence to WeWork was trying to defraud or break the lease in some substantial way, then I guess you'd have some legal recourse, but the whole purpose for the SPE is to limit legal exposure (which is exactly why we did it).

The thing is that the SPE is absolute requirement for WeWork. They will walk away if you try to challenge them on it. It's ultimately not an issue unless shit hits the fan. Smart underwriters will recognize that and price it accordingly. Unfortunately, there will be many that don't and execs that are trying to push value, so won't want a conservative view on those leases.

The biggest risk (outside of WeWork itself) is bullish investors buying properties at inflated values due to WeWork being on the rent roll, not doing their due diligence on the WeWork lease, and the bottom dropping out.

Re: WeWork Isn’t a Tech Company

#82

Post by human20190310 »

mrtksn wrote: post #74
the_gastropod wrote: post #42

Earlier quoted context omitted.

> In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. Some day, maybe they could?! But their current business is selling short term office space leases. They have massive liabilities in their long-t…

Most technology IPO were of companies that were losing money, people bought what they might become one day. Nothing new here, maybe they will change the way they operate when they establish the brand and optimize the operations.

The depth of the hole they're in at IPO time has some bearing as to whether or not they'll climb out of it.

Re: WeWork Isn’t a Tech Company

#83

Post by SilasX »

goatinaboat wrote: post #80
whoisnnamdi wrote: post #46

Earlier quoted context omitted.

I might be confused, but isn't it the opposite here? Borrowing long (long-term leases from suppliers) and lending short (month to month leases to customers)? You yourself said "long term promises to suppliers keep going", which sounds like borrowing to me? I could just be dense here, feel free to correct me

Maturity transformation, to give it its proper name, isn’t inherently a bad business; it’s how your bank transforms your weekly or monthly pay packet into a 25-year mortgage. But - and here is the crucial point - it is not tech .

It is a bad business generally, because it requires an unfailing entity to exist as a stopgap ("lender of last resort") who will take the hit to prop you up as the short term payment becomes due, for the inevitable times when the payments don't line up. WeWork doesn't (yet) have that.

Re: WeWork Isn’t a Tech Company

#84

Post by tryitnow »

buboard wrote: post #2

... and yet it will be valued as one. At this point it doesn't matter if anything really is tech or not. Rich people just want to park their money away from banks. (As an aside, i think WeWork’s S1 has turned to a remarkable feat of marketing, making buzz around the company in cycles who are likely to be their customers)

Bingo. Although I don't know about rich people wanting to park their money away from banks. It's more like we have a massive capital glut, there's so much capital sloshing around we don't know what do with it.

So some wealthy people will buy bonds with negative yields, others will buy equity at inflated valuations like WeWork.

Strange times.

Re: WeWork Isn’t a Tech Company

#85

Post by mrtksn »

human20190310 wrote: post #82
mrtksn wrote: post #74

Earlier quoted context omitted.

Most technology IPO were of companies that were losing money, people bought what they might become one day. Nothing new here, maybe they will change the way they operate when they establish the brand and optimize the operations.

The depth of the hole they're in at IPO time has some bearing as to whether or not they'll climb out of it.

But this doesn’t say if they are a tech company or not. If you think that it’s a bad investment simply don’t invest? Why is the “WeWork ain’t tech company” uproar?

Re: WeWork Isn’t a Tech Company

#86

Post by [deleted] »

the_gastropod wrote: post #42
mrtksn wrote: post #32

I really don't understand the negativity on HN towards WeWork. In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. The article argues that the difference is that Uber, AirBnB, Yelp, Twitter is a tec…

> In principle, how it is different than AirBnB or Uber in regard of being a tech company? It's not like Uber or AirBnB's core compentancies are tech, I'm sure WeWork can also build a dev team making frameworks and research that some day might be used in their core business. Some day, maybe they could?! But their current business is selling short term office space leases. They have massive liabilities in their long-t…

[deleted]

Re: WeWork Isn’t a Tech Company

#87

Post by AlexandrB »

SamBam wrote: post #33
JJMcJ wrote: post #23

A lot of "tech" companies aren't. One reason, to avoid the scrutiny describing their actual business would expose them to more scrutiny, e.g., Uber is transportation company, not a software company. Once the BBC described Google as an "American advertising company", now that's cold.

I think, from the article, that the reason that Uber would be considered a tech company and not a transportation company is a matter of assets and how it can scale. Uber is not a bus company. It does not own a gigantic fleet of cars or large depots to store them in, nor does it employ mechanics and cleaners to tend to them, or have long-term contracts for gates at stations around the country. Uber is a tech company b…

> Uber is not a bus company. It does not own a gigantic fleet of cars or large depots to store them in, nor does it employ mechanics and cleaners to tend to them, or have long-term contracts for gates at stations around the country.

Ironically, if Uber achieves its self-driving dreams it will have acquire all of these things.

Re: WeWork Isn’t a Tech Company

#88

Post by decafninja »

paxys wrote: post #10

I like that WeWork is finally forcing us to have the conversation about WTF a "tech company" even is. A company that sells software? Or one that employs a lot of engineers? Or companies that use a lot of tech in their operations? Companies with a presence in San Francisco and Kombucha on tap? Are big banks tech companies? Insurance providers? Hospitals, auto manufacturers, oil and gas... What isn't a tech company?

From a pure standpoint? Any company that makes tech - hardware or software - is a tech company.

From a usage perspective? Any company that heavily utilizes tech in their day to day operations is a tech company too.

From a software engineer's career perspective? "Tech company" has become a term often used here, and usually refers to a company whose core business involves software engineers, and treats them as respected first class citizens.

Companies that fall under the first two descriptions may or may not fall under the third.

Re: WeWork Isn’t a Tech Company

#89

Post by the_gastropod »

mrtksn wrote: post #85
human20190310 wrote: post #82

Earlier quoted context omitted.

The depth of the hole they're in at IPO time has some bearing as to whether or not they'll climb out of it.

But this doesn’t say if they are a tech company or not. If you think that it’s a bad investment simply don’t invest? Why is the “WeWork ain’t tech company” uproar?

It seems like you're just not listening. They're not a tech company because they, while they may use software for some things, it's not their differentiator.

Tech companies are valued at higher multiples because software doesn't deal with scarcity. It costs Microsoft virtually nothing to sell an extra copy of Windows. So each extra sale is pure profit. WeWork sells OFFICE SPACE—something with real world scarcity, and each additional sale / customer they get has very real costs and overhead associated with it.

Re: WeWork Isn’t a Tech Company

#90

Post by alonmower »

paxys wrote: post #10

I like that WeWork is finally forcing us to have the conversation about WTF a "tech company" even is. A company that sells software? Or one that employs a lot of engineers? Or companies that use a lot of tech in their operations? Companies with a presence in San Francisco and Kombucha on tap? Are big banks tech companies? Insurance providers? Hospitals, auto manufacturers, oil and gas... What isn't a tech company?

I think that the main reason that WeWork has been referred to in the same breath as other tech companies is because the offices they build out resemble the nice, cushy offices that tech companies are famous for (and that lots of their tenants are software companies)
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