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WeWork says will file to withdraw IPO

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141–150 of 404 posts

Re: WeWork says will file to withdraw IPO

#141
post #111

Earlier quoted context omitted.

Furthermore, and this to me is the most damning indictment: where's the moat? SoftBank and Masayoshi Son's hypothesis is: 1. Find a market which can be captured by a business with access to massive capital 2. Provide massive capital 3. Extract profits once a monopoly has been established WeWork is a terrible example of this, because in no way does scale give them unique advantages. And furthermore, "scale" in this co…

Same for Uber.

I was going to include Uber, but there's an argument that creating a realtime, massively-scaled fare-setting infrastructure is a moat.

Uber's product isn't rides. Uber's product is being the market-maker between riders and drivers.

Re: WeWork says will file to withdraw IPO

#142
post #19

What I don't understand is how do things get this far down the road before a good old fashioned sanity check happens? I have got to think that Soft Bank knew/knows the valuation was off. The fact that they pushed on means they either intended to try and get away with it/take the money and run as I cant believe incompetence is the reason here. How did this get so far along??? As for Adam N, I have to think some part o…

“There are three ways to make a living in this business: be first, be smarter, or cheat.“ -Margin Call SV ran out of the first two because they are much harder. We are left with the dying gasps of companies trying the third way.

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Re: WeWork says will file to withdraw IPO

#143
post #19

What I don't understand is how do things get this far down the road before a good old fashioned sanity check happens? I have got to think that Soft Bank knew/knows the valuation was off. The fact that they pushed on means they either intended to try and get away with it/take the money and run as I cant believe incompetence is the reason here. How did this get so far along??? As for Adam N, I have to think some part o…

Fred W just wrote about this, with a fairly moderate perspective. Reality check, rather than reality crashing down.

I think wework just has too many things wrong with it. (1) Recent IPOs (eg uber), weren't great. (2) Financial performance from uber and other recent IPOs isn't great. (3) Theranos is old-ish news by now, but it's a good example of what public investors are looking out for: bubble excesses. Public markets atm are moneyed, but skeptical. Worried about this new, enormous private equity market pumping and dumping on them.

Once you add in the (4) difficult-to-understand ownership structure (with dubious scent), (5) complex leveraging/debt/liabilities and (6) complicated entanglement in the real estate market movements.....

It just adds up to too much, IMO. Every one of those 6 "problems" could make wework look like a "you should have known better" investment, CEO scandals cultural weirdness aside.

^IMO it's more about monopolies (thiel's definition) than software. Selling software doesn't guarantee "software margins" long-term. What uber, wework, etc. lack is monopoly mechanisms: lock-in or network effects. Even though uber is a market/network, the market can happily bear more than one ride hailing app. That means margin-killing price competition.

Re: WeWork says will file to withdraw IPO

#144

Earlier quoted context omitted.

WeWork’s plan was to raise at least $4Bn from IPO which would unlock $6Bn in bank loans, before the end of the year. Now they have a $10Bn hole in their budget which coincidentally is almost exactly the same size as SoftBank’s investment in them. They are in a lot of trouble if SoftBank doesn’t double down, and do it soon. Q4 starts tomorrow! And $10Bn may be more than the entire company is worth!

Which brings a question - could it be that this entire thing was Softbank's play to control the entire company? $6B to get the seat at the table. $10B now as a down around for a wipe out?

$16B is a lot to pay for a turkey, even if you wipe out all the other shareholders in it.

Re: WeWork says will file to withdraw IPO

#145

Earlier quoted context omitted.

We've been seeing nothing but bullshit valuations for years. Twitter was a bullshit valuation. I'm just glad we finally had a sanity check on something .

Twitter might be a bad example. The current P/E of Twitter is around 14 with the stock trading around 80% over the IPO price.

And when was the last time Twitter turned a profit?

Re: WeWork says will file to withdraw IPO

#146
I might kind of understand the valuation if they had some revolutionary technology that was projected to change the companies profitability profile. But they don’t have that. They don’t even have a revolutionary business model. They sublet office space. If you think the losses are bad now, I can only imagine how horrific they will be in a recession when their tenants start default en masse.

Re: WeWork says will file to withdraw IPO

#147
post #82

Earlier quoted context omitted.

How is this comment relevant to WeWork? How has it "cheated"? It definitely is early/first and very smart.

> How is this comment relevant to WeWork? How has it "cheated"? They borrowed short, lent long and then pretended it was as sustainable business. To their credit, they abundantly disclosed their shenanigans. (I haven't seen any evidence suggesting investors can reasonably claim fraud.) But they were playing fast and loose with basic economics. At its core, sure, WeWork could have been a business. Its thesis, that off…

There's also the Softbank buys of equity at consistently higher and higher valuations that they themselves were creating.

Matt Stoller wrote a great post about it:

https://mattstoller.substack.com/p/wework-and-counterfeit-ca...

"Generally speaking, Softbank’s model is to manipulate private capital markets as a way of drowning out competitors with cash. For instance, there were several ‘rounds’ of WeWork investment where Softbank was buying more shares at higher valuations. WeWork ostensibly became more valuable because Son said it was more valuable, and bought shares for higher prices. And since there was no public market for these shares, the pricing of the shares was totally arbitrary. WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses.

Engaging in such a strategy used to be illegal, and was known as predatory pricing. There are laws, like Robinson-Patman and the Clayton Act, which, if read properly and enforced, prohibit such conduct. The reason is very basic to capitalism. Capitalism works because companies that thrive take a bunch of inputs and create a product that is more valuable than the sum of its parts. That creates additional value, and in such a model companies have to compete by making better goods and services.

What predatory pricing does is to enable competition purely based on access to capital. Someone like Neumann, and Son’s entire model with his Vision Fund, is to take inputs, combine them into products worth less than their cost, and plug up the deficit through the capital markets in hopes of acquiring market power later or of just self-dealing so the losses are placed onto someone else."

Re: WeWork says will file to withdraw IPO

#148

Earlier quoted context omitted.

> I have got to think that Soft Bank knew/knows the valuation was off. For private rounds valuation is part of the equation, but liquidation preferences and ratchets are likely more important. As the famous finance saying goes "You set the price - I set the terms, you set the terms - I set the price". SoftBank has negotiated downside protection. Everything from there is just gravy on top. The press never seems to dis…

What major downside or any protections does SoftBank have with WeWork right now? Is there anything they are getting now or likely to get that doesn’t still have them $7B or so down the hole for WeWork? The major thing is usually first dibs if the company sells for a lot less than the later valuations. In this case that doesn’t seem likely to happen with Softbank getting back most of their investment

https://www.cnbc.com/2019/09/24/softbank-has-a-multi-million...

Re: WeWork says will file to withdraw IPO

#149
post #111

Earlier quoted context omitted.

> How is this comment relevant to WeWork? How has it "cheated"? They borrowed short, lent long and then pretended it was as sustainable business. To their credit, they abundantly disclosed their shenanigans. (I haven't seen any evidence suggesting investors can reasonably claim fraud.) But they were playing fast and loose with basic economics. At its core, sure, WeWork could have been a business. Its thesis, that off…

Furthermore, and this to me is the most damning indictment: where's the moat? SoftBank and Masayoshi Son's hypothesis is: 1. Find a market which can be captured by a business with access to massive capital 2. Provide massive capital 3. Extract profits once a monopoly has been established WeWork is a terrible example of this, because in no way does scale give them unique advantages. And furthermore, "scale" in this co…

I can't quantify it - but WeWork's scale does give them a bit of an advantage.

I run a small digital agency, as a WeWork member when I'm on the road being able to know I can find and book space for meetings or work is invaluable. We've also spun up offices in new cities (Mexico City for us) easily and quickly with a confidence in the level of service and support that we're getting.

There is a premium for this and we've moved on from those offices sometimes as we settle in. But its not a non-existent advantage.

Re: WeWork says will file to withdraw IPO

#150

I wonder at what point the fraud charges come out. As opposed to Theranos, in this case some insiders did very well.

Theranos didn't go public, for good reason. WeWork OTOH doesn't appear to have committed fraud. On the contrary, they've been extremely forthcoming in their S-1 about how rickety their business model is.
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