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WeWork Bonds Drop Below Par for First Time Since IPO Filing

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Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#111

Post by Traster »

mtkd wrote: post #58
duxup wrote: post #4

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…

IPO valuation aside -- it is premature to write the WeWork model off It could end up being a strong counter-cyclical model -- and outperforms as the economy tightens Traditional office space is a 2, 5, 10 year commitment and a pain to move things around -- with WeWork you're paying monthly and relocating geographically is simple CFOs will often look to pay more per month for shorter commitments which fit well with bu…

I'm sorry I've heard these claims but I'm strongly sceptical. WeWork source their office space on long term contracts and lease them on short term contracts. So in order for them to make more money during a recession there needs to be an increase in demand for office rental space during a recession. Even if that does occur, a competitor could come in and rent some of the office space freed up by the recession and out-compete wework by having lower costs. That's best case. In reality, in a recession companies look to lower their cost - the first people they'll get rid of is the high cost wework spaces, consolidating employees into larger regional offices (which traditionally has the side benefit of lowering headcount). No one is increasing their high cost offices during a recession.

In a bull period, you're right, CFOs will be willing to spend a little more on high risk projects to allow them to mitigate the risks of long term contracts, but that's not what happens during a recession. During a recession they're overwhelmingly looking to demonstrate a lean, low cost company to shareholders.

Like many of the wework stories, it'd be nice if it were true, but it's just simply not very likely.

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#112

Post by UncleOxidant »

nabdab wrote: post #91
cs702 wrote: post #37

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…

Framing the entire market as “either you buy into this single obvious scam or everything falls apart” is extreme. WeWork has been a gamble throughout, and the latest antics just pushed investors from “yes its a bad investment long term but short term I’ll make a profit” into straight up “this bag is on fire and I’m sure it’s filled with shit so I’ll let someone else step on it”. Wework failing is not going to trigger…

Now do Uber.

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#113

Post by khuey »

fastball wrote: post #95
Litmus2336 wrote: post #70

Earlier quoted context omitted.

There are valid reasons to invest in a company that doesn't make profit now, but will in the future. Almost every business has this phase - it could be short (a lawnmower company that goes 5k in the hole for equipment) or big (a company with an idea to revolutionize the DVD to consumer marketplace, that starts operating at a loss until they build up the required customerbase). Now, the big issue is that everyone thin…

I think the problem is less companies that don't make profit and more all the companies that have raised a lot of capital without making that much revenue .

Not really, if you have access to capital it's easy to fudge revenue by selling dollars for ninety five cents, which is more or less what many of these companies are doing.

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#114

Post by dmitrygr »

cs702 wrote: post #37

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…

Wouldn't the market shifting to "show me the profits" be a good thing overall?

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#115

Post by bksenior »

chris11 wrote: post #101
bksenior wrote: post #96

Earlier quoted context omitted.

yea, no. It's simply an overpriced asset and the market is concerned that without an adjustment there isnt much room to grow in value. I dont think anyone think WeWork is not a strong business model. Id even take it one step further in that it's not the cash burn thats really killing people, it's the valuation. I know theyre connected as a larger company should hypothetically be able to sell less of itself for more m…

I'm not sure that WeWork has a strong business model. WeWork is absorbing the financial liability of signing long-term leases, and not passing that risk onto their customers. So financial discipline is critical to their business plan. Customer growth without financial discipline will just increase those liabilities.

Naw fam, you're ignoring the growing trend of short term leases and the value of a consistent repeatable brand in the space. It's not an industry killer, but they still do have a strong product.

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#117

Post by fullshark »

cs702 wrote: post #37

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…

If we don't believe the emperor has clothes then we'll all lose faith in the gov't and it will collapse.

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#118

Post by ajross »

cs702 wrote: post #37

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…

> It's remarkably easy to make fun of WeWork

Exactly. I don't understand all the schadenfreude about this company. WeWork is a basically good idea that seems to fill a real need, they just couldn't make it work in the economic environment they found themselves in (which, to be fair, is mostly about the "funding environment", and thus sort of an own-goal given that they didn't "need" to take all that cash).

That said: I don't know that I agree with the 2000 crash analogy. My feeling at the time was that the venture investors were a lagging indicator. The crash started in the already-public stocks at time when angels and VC's were still desperate to make deals.

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#119

Post by ulfw »

cs702 wrote: post #37

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…

WeWork is in no way, shape or form a tech company. Thus I feel the comparisons to 2000 (or to other real tech businesses of today) fall apart at that point already.

Re: WeWork Bonds Drop Below Par for First Time Since IPO Filing

#120

Post by tim333 »

duxup wrote: post #5
bhouston wrote: post #3

It does not seem to be a viable business so this makes sense. I think that there was some type of hope that access to IPO funding will allow it to continue to search for a viable business model. This path to possible success seems to be dwindling. If WeWork needs to have a self-sustaining business model in the near term, it could quickly collapse. I am not sure but will SoftBank and other wealthy investors continue t…

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.

From SoftBank's Son, the largest investor:

>It is rare for Son, who casts a wide net with his startup investments, to commit so much resources to a single company. But he said WeWork is more than just a renter of office space: it is "something completely new that uses technology to build and network communities."

>"WeWork is the next Alibaba," Son said, referring to SoftBank's early investment in the e-commerce company, which enjoyed meteoric growth as the internet took off in China.

>"I believe it will grow to a substantial scale and become one of our core companies," he said. https://asia.nikkei.com/Spotlight/Sharing-Economy/SoftBank-s...

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