WeWork sues SoftBank over canceled $3B tender offer • Hacker News Board

Re: WeWork sues SoftBank over canceled $3B tender offer

#101

Post by eldavido » Tue, Apr 07, 2020, 9:45 PM UTC

TheOtherHobbes wrote: post #91

toomuchtodo wrote: post #88

Earlier quoted context omitted.

Landlords have mortgages to pay. Bondholders hold those notes. There is very little slack in the system for this scale of default.

Some landlords have mortgages to pay. How many WW properties are still owned by Adam Neumann?

This whole thing frustrates me so much. It's like people are just spouting off random opinions not substantiated by any data or real-world experience...at all.

I just looked it up. WeWork has 848 locations globally. These locations aren't in houses...they're in gargantuan, tall office buildings, worth tens/hundreds of millions of dollars each. If Adam Neumann is a billionaire, AND if he has most of his wealth in commercial real estate (I'm sure he doesn't), he might own...5-10 of these. The rest are owned by REITs like Simon Property Group, Thor Equities, CB Richard Ellis (CBRE), Jones Lang LaSalle (JLL), and others.

Re: WeWork sues SoftBank over canceled $3B tender offer

#102

Post by eldavido » Tue, Apr 07, 2020, 9:48 PM UTC

worik wrote: post #72

tomp wrote: post #32

Earlier quoted context omitted.

Not a good analogy. The house already pretty much burned down before SoftBank agreed to (second) round of investment.

No it had not. I am a long way away but from what I can ell from he news I follow it has a good core business. It was run by a crook, who still has his hooks in, but the real estate business was sound. Until all the income from short term leases evaporates due to curfews and the long term leases they pay keep ticking....

It is a good core business. The press is just trying to spin this into some big exciting story as they are wont to do, this time playing up the "How the mighty fall" and "David v Goliath" angle.

I am a paying wework customer as well as a person who owns commercial real estate. There's not much to see here. Some investors paid too much. Let's all let them take their losses and move on. I'm tired of hearing every tech-hating, New York Times-reading, "in the know" person having some huge opinion on this.

Re: WeWork sues SoftBank over canceled $3B tender offer

#103

Post by eldavido » Tue, Apr 07, 2020, 9:52 PM UTC

bruceb wrote: post #3

Not surprising, was wondering how SoftBank seemingly walked away so easily. If you are Softbank do you use this Covid crisis to back WeWork in to a corner even if their suit is legitimate as they might run out of cash before it reaches the courts? From what I understood SoftBank already owns a majority of WeWork so how does the company they own, suing them work?

The thing you want to read about here is "material adverse change". Look it up. It's a contractual clause common in M&A that lets the buyer back out if something "bad" happens.

A textbook MAC would be, I'm buying a house and the house burns down. The core of this litigation is sure to be whether whatever has happened with wework is in scope for the MAC clause in their loan/M&A docs, or not.

Re: WeWork sues SoftBank over canceled $3B tender offer

#104

Post by Simulacra » Tue, Apr 07, 2020, 9:52 PM UTC

grugagag wrote: post #99

Simulacra wrote: post #80

Does this mean Adam won't get his billions?

Yes! But he still has hunderds of millions..

Good but ..oh well.

Re: WeWork sues SoftBank over canceled $3B tender offer

#105

Post by eldavido » Tue, Apr 07, 2020, 9:58 PM UTC

code4tee wrote: post #59

dreamcompiler wrote: post #51

Earlier quoted context omitted.

They were basically insolvent when the extra Softbank cash failed and the IPO failed. And that was before COVID-19. But you make a good point: They owe so much in leases they have huge negotiating power, and with COVID-19 they probably have even more since nobody's renting space right now.

Having a lease is not the same as “owing the bank money” to go with the loan analogy. Yes it’s painful for landlords but the landlords have options. If they kicked WeWork out they’re not just out the money in the way a bank is if a borrower defaults. There’s some short term pain but if WeWork has long leases at some point it benefits the landlords to just kick them out and move on.

Yes it is. It is exactly the same thing. A landlord is an unsecured creditor just like a lender with a loan that isn't backed by pledged collateral. In general, any unsecured creditor, whether bank, landlord, etc can sue or take other legal action to recover what they're owed. Though they might not win.

What the common discourse around this situation misses is how the landlords are very much on the hook if WeWork blows up. Especially given the broader economic contraction, there is no scenario where the landlords will force WeWork into destruction/non-operation. WeWork might file for chapter 11 bankruptcy and there's going to be some losses, but the odds of this business simply saying, sorry guys, we're closed, pack up your shit and go home, are effectively zero.

Re: WeWork sues SoftBank over canceled $3B tender offer

#106

Post by eldavido » Tue, Apr 07, 2020, 10:01 PM UTC

dreamcompiler wrote: post #51

eldavido wrote: post #35

Earlier quoted context omitted.

Is this informed by any data or facts whatsoever? Last time I checked, WeWork was a going concern with 600,000 customers more or less happy with their service. What would tank them? Are their lease obligations too large and can't be renegotiated? This entire thing is blown so far out of proportion. Like Tesla, it seems like a company that mostly makes products people like, whose equity is extremely hard to value. May…

They were basically insolvent when the extra Softbank cash failed and the IPO failed. And that was before COVID-19. But you make a good point: They owe so much in leases they have huge negotiating power, and with COVID-19 they probably have even more since nobody's renting space right now.

If you have some time, read a few books about how huge debt crises get resolved. It's fascinating. My friend Drew is a huge "bankruptcy geek" and eats this shit up.

A good starter book: "This Time It's Different", often referred to as "Rheinhart and Rogoff" by the authors names. https://www.amazon.com/This-Time-Different-Centuries-Financi... - great overview of how many nation-state debt crises got resolved. In general, most parties end up taking a haircut (not a total loss) and everyone gets on with their life.

Sears and Radio Shack are interesting cases from the corporate (not government) world. There are entire specialist law firms and financing companies that deal just with distressed debt.

What's crazy to me is how much this stuff repeats. Argentina has been a basket case almost nonstop for the last 20 years and yet, people still lend to them. Why anyone would continue to do this over and over befuddles, but just goes to show how crazy things can be.

Re: WeWork sues SoftBank over canceled $3B tender offer

#107

Post by joejerryronnie » Tue, Apr 07, 2020, 10:21 PM UTC

evgen wrote: post #39

joejerryronnie wrote: post #17

SoftBank should hold out until WeWork crumbles under the weight of their terrible business model and the current crisis, then purchase their real estate assets for pennies on the dollar.

What real estate assets? Long-term lease agreements at what is certainly above market rates given the current situation?

You’re right, WeWork probably doesn’t own any of the buildings they operate in

Re: WeWork sues SoftBank over canceled $3B tender offer

#108

Post by [deleted] » Tue, Apr 07, 2020, 10:25 PM UTC

eldavido wrote: post #101

TheOtherHobbes wrote: post #91

Earlier quoted context omitted.

Some landlords have mortgages to pay. How many WW properties are still owned by Adam Neumann?

This whole thing frustrates me so much. It's like people are just spouting off random opinions not substantiated by any data or real-world experience...at all. I just looked it up. WeWork has 848 locations globally. These locations aren't in houses...they're in gargantuan, tall office buildings, worth tens/hundreds of millions of dollars each. If Adam Neumann is a billionaire, AND if he has most of his wealth in comm…

[deleted]

Re: WeWork sues SoftBank over canceled $3B tender offer

#109

Post by mike_d » Tue, Apr 07, 2020, 10:41 PM UTC

jaequery wrote: post #34

I understand Softbank is walking away from the deal. Does that mean they didn't put in any money yet? How much are they losing from this deal?

SoftBank is only walking away from buying out the founders and early employees that got the company in this mess. They continue to invest and extend credit to the company itself.

Re: WeWork sues SoftBank over canceled $3B tender offer

#110

Post by greglindahl » Tue, Apr 07, 2020, 10:45 PM UTC

worik wrote: post #72

tomp wrote: post #32

Earlier quoted context omitted.

Not a good analogy. The house already pretty much burned down before SoftBank agreed to (second) round of investment.

No it had not. I am a long way away but from what I can ell from he news I follow it has a good core business. It was run by a crook, who still has his hooks in, but the real estate business was sound. Until all the income from short term leases evaporates due to curfews and the long term leases they pay keep ticking....

Literally the entire real estate industry thought WeWork would go bankrupt in the first downturn, due to the focus on short-term leases and the mismatch with WeWork's underlying long-term leases.

Well, here we are.

You might try finding more diverse news sources. Even comments on HN pointed out this particular issue.