41–50 of 134 posts
It's remarkably easy to make fun of WeWork, given the company's high-as-a-kite ambitions, its largely conjectural business model, its dependence on fresh capital for survival, its charismatic CEO’s new-age antics, and its disregard for conventional norms of ethical corporate behavior.[a] But if the IPO of a company as prominent as WeWork fails and the company is unable to raise the fresh capital it needs to stay aflo…
softbank just called the top
This IPO story is struggling. There have been several recent examples of public confidence in the business model collapsing post IPO, but the WSJ and others are reporting on this so heavily as it looks like we’re now seeing public confidence starting to fall apart before the IPO of an ultra-unicorn. Get your popcorn ready. Someone might buy these bonds at their deflated prices because WeWork still needs to pay intere…
There isn't an institution in the world that could sell an IOU $100 for $100, not even the US Treasury. For example, if you bought a 1-year dated IOU for $100 from the US Treasury today, it would cost only $98.30. Edit: this comment was written in response to the parent before it was edited to remove any trace of what was being replied to.
Bonds have a face value (which you get paid at maturity) and a coupon (interest payment calculated as either a fixed percentage of face or as a spread over an underlying rate * face)[1]. Both of those components matter to investors and factor into the so-called "yield to maturity" of the debt. The bond price dropping means that the secondary market is demanding a higher yield to maturity on the debt.
The main drivers of that price are the underlying risk-free rate of interest (which compensates investors for the difference in utility between having cash now and having cash in the future and essentially arbs out between all the different risk-free or near-risk-free instruments they can invest in) and the credit spread (which compensates them for the likelihood of default and arbs out with other instruments of similar riskiness and the prices of things like CDSs).
In the 1yr T-bill example, almost all of the price discount you are quoting is about the risk-free rate of return. So say the rates were at 4% when a 10yr note was issued, we are now in the final year and rates have gone up since then, then the price of the bond would drop so that investors get a yield-to-maturity on this bond that is approximately the same as other instruments of equivalent maturity.
The WeWork example is going to be driven by the credit spread - how likely WeWork's is to default and how much investors would be likely to recover in that event. The price going down is to do with the credit spread widening and therefore investors demanding a higher interest rate to compensate.
[1]I'm simplifying a lot here given all the weird and wonderful types of bonds you can get.
It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it. I know there were some theories on cornering the market, or getting some sort of huge buy in / contracts with companies hiring remote workers but for the most part there's plenty of office space (at least in my…
> It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it The nutty thing is WeWork could have worked as a well-executed business. The core thesis, that companies of all sizes appreciate the flexibility of spinning up and down remote workplaces as a variable (versus…
It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it. I know there were some theories on cornering the market, or getting some sort of huge buy in / contracts with companies hiring remote workers but for the most part there's plenty of office space (at least in my…
> It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it The nutty thing is WeWork could have worked as a well-executed business. The core thesis, that companies of all sizes appreciate the flexibility of spinning up and down remote workplaces as a variable (versus…
Earlier quoted context omitted.
> It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it. That is basically what they did, but they also marketed it really well and made the process seamless. Everyone points to Regus as an example of a company that already existed in WeWork's space, but as far as…
There's marketing and there's targeted marketing. All the people who need the services Regus provides know about Regus.
It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it. I know there were some theories on cornering the market, or getting some sort of huge buy in / contracts with companies hiring remote workers but for the most part there's plenty of office space (at least in my…
I think the established office owners were astonished at the high valuations in an otherwise boring industry. I remember this article from a few months ago. https://www.reuters.com/article/us-usa-property-wework-value... It also mentions the big problem with We, than in the next downturn the revenue will likely stop and it'll be in trouble.
Earlier quoted context omitted.
I wonder what they sold their initial investors on? I've heard a lot of theories (cornering the market, the future of remote work) but I don't quite get what WeWork was selling folks on when it came to investing and evaluations that were so high in the first place.
My guess is that initially they focused on a market that was underserved by tech (short-term real estate). That by itself is probably enough to get some initial funding. Then you show that you're actually executing, at least as far as being able to grow and manage a real business with real revenues, which can easily get you another round. From there they did two things. The first was to start to securitize the busine…
Are we just calling "California hipster marketing" "tech" now?
It's remarkably easy to make fun of WeWork, given the company's high-as-a-kite ambitions, its largely conjectural business model, its dependence on fresh capital for survival, its charismatic CEO’s new-age antics, and its disregard for conventional norms of ethical corporate behavior.[a] But if the IPO of a company as prominent as WeWork fails and the company is unable to raise the fresh capital it needs to stay aflo…
Earlier quoted context omitted.
> It just seems like WeWork took an existing business model of renting office space, went all VC and gathered a bunch of money and sky high evaluation (toss in some creepy insider dealing) ... and ... that's it The nutty thing is WeWork could have worked as a well-executed business. The core thesis, that companies of all sizes appreciate the flexibility of spinning up and down remote workplaces as a variable (versus…
Don’t forget the weird cultish vibe of WeWork, like the forced summer camp, etc. This alone tells you something is very wrong.