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WeWork Isn’t a Tech Company

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Re: WeWork Isn’t a Tech Company

#101

Post by konschubert »

whoisnnamdi wrote: post #46
rlucas wrote: post #20

It's a 1920s (pre-FDIC) bank, or a 2008-style risky financial instrument, like an Auction-Rate Preferred. WeWork's business model is "borrow short, lend long." That is, they accept very short term promises to pay (month to month leases from customers), and aggregate them to make very long term promises to pay (mutli year leases from suppliers). Keep the spread. This works as long as there are lots of customers who wi…

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

When people say “borrow” in this context; they mean the money, not the space.

We-work gets short-term monetary commitments from renters and turns them into long-term monetary commitments towards landlords

Re: WeWork Isn’t a Tech Company

#102

Post by adamnemecek »

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?

One that derives value from intangible assets. HW companies are on the boundary.

Re: WeWork Isn’t a Tech Company

#104

Post by ericd »

kolbe wrote: post #91
WhompingWindows wrote: post #58

Earlier quoted context omitted.

Incorrect, You don't just "get put into" the SP500, you need to meet the qualifications first. I doubt WeWork will reach positive earnings and a market cap of 5.3 bln anytime soon. --It must be a U.S. company. --The market cap must be $5.3 billion or more. --The public float must consist of at least 50% of outstanding shares. --It must have positive reported earnings in the most recent quarter, as well as over the fo…

> I doubt WeWork will reach positive earnings and a market cap of 5.3 bln anytime soon. No one said anything about "anytime soon" (1) They are a US company. (2) They raised at a $40bn valuation in their last funding round, so I don't know why you think a $5.3bn market cap is out of the range of possibility. (3) The float will be whatever it is. (4) WeWork is a real estate company. Real estate companies tend to make p…

Softbank is currently making up the valuation, and by doing so, setting the value for their existing holdings. Take those valuations with a large grain of salt, it's not like a publicly traded security where you can be reasonably sure of getting around that market value if you decided to sell right now.

Re: WeWork Isn’t a Tech Company

#105

Post by dsl »

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 .

Uber isn't tech, it is a taxi company.

Stripe isn't tech, it is a payment processor.

Airbnb isn't tech, it is a hotel.

SpaceX isn't tech, it is a defense contractor.

Re: WeWork Isn’t a Tech Company

#106

Post by chiefalchemist »

dsl wrote: post #105
goatinaboat wrote: post #80

Earlier quoted context omitted.

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 .

Uber isn't tech, it is a taxi company. Stripe isn't tech, it is a payment processor. Airbnb isn't tech, it is a hotel. SpaceX isn't tech, it is a defense contractor.

They all need technolgy and came about because of the powerful handheld mobile device. The first three are at least software companies.

Business and social changes aside, WeWork could have happened 20 years ago.

Re: WeWork Isn’t a Tech Company

#107

Post by chiefalchemist »

99052882514569 wrote: post #25
rlucas wrote: post #20

It's a 1920s (pre-FDIC) bank, or a 2008-style risky financial instrument, like an Auction-Rate Preferred. WeWork's business model is "borrow short, lend long." That is, they accept very short term promises to pay (month to month leases from customers), and aggregate them to make very long term promises to pay (mutli year leases from suppliers). Keep the spread. This works as long as there are lots of customers who wi…

Their business is structured in such a way that the leases they signed on their locations aren't really enforceable against WeWork itself, but rather against "special purpose vehicles", I'm guessing one per lease?[1] It costs a bit in insurance but substantially limits their liability. So, in a downturn, even if "short termers are done", they can shed properties too, basically with impunity. [1] https://stratechery.c…

Shed properties...and merge any remaining tenants into other locations.

Re: WeWork Isn’t a Tech Company

#108

Post by maratd »

chiefalchemist wrote: post #106
dsl wrote: post #105

Earlier quoted context omitted.

Uber isn't tech, it is a taxi company. Stripe isn't tech, it is a payment processor. Airbnb isn't tech, it is a hotel. SpaceX isn't tech, it is a defense contractor.

They all need technolgy and came about because of the powerful handheld mobile device. The first three are at least software companies. Business and social changes aside, WeWork could have happened 20 years ago.

> They all need technolgy and came about because of the powerful handheld mobile device.

I'm not sure why Uber is a tech company because you can order a taxi using your phone, but WeWork is not ... because you can reserve a room or space using your phone?

Not all members pay for an office. Some of us are nomads and stay at whichever WeWork is convenient. We make reservations for space using our phone.

Re: WeWork Isn’t a Tech Company

#110

Post by chiefalchemist »

polygotdomain wrote: post #66
99052882514569 wrote: post #25

Earlier quoted context omitted.

Their business is structured in such a way that the leases they signed on their locations aren't really enforceable against WeWork itself, but rather against "special purpose vehicles", I'm guessing one per lease?[1] It costs a bit in insurance but substantially limits their liability. So, in a downturn, even if "short termers are done", they can shed properties too, basically with impunity. [1] https://stratechery.c…

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…

> The losers in the WeWork deal are the landlords, as they're bearing a lot of the risk, and get minimal upside.

Couldn't this be interpreted differently? That is, landlords are having less and less choice. Something from WW is better than an empty building. Is WW a canary of sorts? It tells us about changes in the economy (less growing small to mid-size companies in major metro area?), as well as the health and strength there of?

And if building owners are own details space their choices are less robust. WW might not pay out well, but it's better than nothing.

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