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SoftBank to take control of WeWork: Sources

cnbc.com

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Re: SoftBank to take control of WeWork: Sources

#131

Post by jimmywanger »

CrazyStat wrote: post #119
philip1209 wrote: post #25

Earlier quoted context omitted.

I don't think their brand is "tarnished." The only people they are beholden to are their LPs, who I assume endorsed this deal. None of the actions they have taken as an investor should make others view their money "toxic." WeWork is just going to have to transition from wartime to peacetime. Ben Horowitz has a great article about what this looks like [1]. They're going to clean up the books, stop making risky acquisi…

The peacetime version of WeWork that you envision already exists, it's called IWG. It's roughly the same size as WeWork but it's only worth $4.5b. Paying $5b for 70% of it doesn't seem like a good idea.

https://finance.yahoo.com/quote/IWGFF?p=IWGFF&.tsrc=fin-srch

This looks like the upper limit for WeWork. It doesn't matter how much nicer looking their offices are or if they have free beer bashes and parties, those expenses are all tiny when it comes to the bottom line of a multibillion dollar corporation.

Plus, Regus has more desks and branches than WeWork, and is orders of magnitude less expensive.

Re: SoftBank to take control of WeWork: Sources

#132

Post by ms4720 »

flukus wrote: post #68
asfarley wrote: post #21

Earlier quoted context omitted.

I took a look to see if Softbank was hiring any vetting-watchdogs to prevent this in the future. They had one open position. It required all applications to have an extensive history at a prestigous VC firm, i.e. they are looking for people from the in-group. I think a less-incestuous vetting strategy would give more honest results. Too bad, I think there's a lot of people on HN who would excel at this position despi…

Considering their current vetting is quite lacking, shouldn't they be looking to hire someone experienced? You don't hire a junior engineer to build you're new enterprise system.

Perhaps shouldn't would be more accurate

Re: SoftBank to take control of WeWork: Sources

#133

Post by TuringNYC »

personlurking wrote: post #83
mdorazio wrote: post #2

Better article in [1]. From the unconfirmed report: - SoftBank to invest $4-5 billion - Pre-money valuation at $7.5-8 billion - SoftBank will end the deal with ~70% control of WeWork - SoftBank's Marcelo Claure to take over as chairman of We - No confirmed word on additional job cuts, asset sales, or clawbacks from Neumann [1] https://www.cnbc.com/2019/10/21/softbank-to-take-control-of-...

Also, from another article (by Axios): "SoftBank will pay former WeWork CEO and current non-executive chairman Adam Neumann around $200 million to leave the board of directors, give up his voting shares and support SoftBank's takeover, according to multiple sources familiar with the situation." https://www.axios.com/adam-neumann-wework-softbank-takeover-...

I'm utterly confused on how Neumann walks away with so much. Given the burn rate and the capital requirements, I cant imagine many other players who can step in at this point. And if no one steps in, the firm is worth zero.

So isnt this a recapitalization of the firm? Why would they need to pay $200M for control if the alternative is some variation of bankruptcy followed by a firesale and cheap buy?

Re: SoftBank to take control of WeWork: Sources

#134

Post by TuringNYC »

ivalm wrote: post #47
nihonde wrote: post #38

Earlier quoted context omitted.

They basically bought control of the company for ~$15B. Any valuation north of $20B ought to put them in the black.

Big Edit: multiplying is hard, forgot to multiply by the PE ratio! Actually, potential valuation is 660B.. so 20% would mean 3% of US office real estate business. At a less generous pe of ~10 (perhaps more appropriate given they don't own the buildings), it would be about 10% of real estate market. ------ Sure, but $20B valuation seems hard to achieve. US commercial real estate market by revenue is ~$1.1T [0] Office…

>> US commercial real estate market by revenue is ~$1.1T [0] >> Office space by value is about 1/8th [1]

I'm a big fan of the WeWork concept, not commenting on specifics of how the business was run.

The way things worked in the past was just silly -- you signed a multi-year lease with no elasticity. I paid WeWork for personal space before and now my employer pays. It is expensive, but only on a unit basis. The model totally makes sense to me as a purchaser.

I guess the WeWork risk is the buy-long sell-short model which is always risky unless you are earning sufficient spread.

Re: SoftBank to take control of WeWork: Sources

#135

Post by jjeaff »

stickfigure wrote: post #44
hari_seldon_ wrote: post #37

Earlier quoted context omitted.

Can you explain why you think they are not going to be forced to remain in “wartime?”

Presumably the unit economics are positive and they will break even.

Apparently the unit economics are still showing lost money because they aren't fully leased at many of their locations so their rationale is that as those locations, mature, they will fill up. Which is pretty normal in the real estate market.

But it's definitely not a certainty that the locations will fill to capacity.

Re: SoftBank to take control of WeWork: Sources

#136

Post by OnlineGladiator »

duxup wrote: post #86
OnlineGladiator wrote: post #65

Earlier quoted context omitted.

I think his point is an insider can't see the forest through the trees, and you need a fresh perspective to understand what's really happening. Basically that hiring an insider just perpetuates the echo chamber.

What makes that resume necessarily an insider?

He means the entire VC industry is an echo chamber.

Re: SoftBank to take control of WeWork: Sources

#137

Post by dannykwells »

thesausageking wrote: post #82

This has to be tough for all of the WeWork employees who were paper millionaires and now have stock options that likely won't survive all of SoftBank's preferences when and if WeWork finally IPOs.

I'll be honest here, cry me a river. Everyone who joins a pre IPO company should value their stock at 0.

Re: SoftBank to take control of WeWork: Sources

#138

Post by semi-extrinsic »

dfcowell wrote: post #123
perl4ever wrote: post #110

Earlier quoted context omitted.

What I read is that $5B is on top of their past investments of roughly $11B.

The $5b is coming from SoftBank Group. The earlier $11b came from the Vision Fund, which is a subsidiary with an entirely different operating environment.

Sure, but it still means somehow Masayoshi Son (and the investors whose money he manages) has paid $16bn for a thing now worth $8bn.

Re: SoftBank to take control of WeWork: Sources

#139

Post by astrodust »

stjohnswarts wrote: post #126
philwelch wrote: post #97

Earlier quoted context omitted.

Rebranding can happen, and the “charismatic leader” was the #1 problem. The bull case for WeWork that I always heard was based on the existence of a WeWork-shaped market opportunity, and WeWork themselves being in pole position to take it. The bear case was that WeWork was run by crazy people. I think SoftBank’s decisions here are making the best of a bad situation.

I agree, with the loon no longer in the lead, they have a chance.

They've been upgraded from no hope in hell to a slim chance in hell.

Re: SoftBank to take control of WeWork: Sources

#140

Post by semi-extrinsic »

ceejayoz wrote: post #116
hilbertseries wrote: post #70

Earlier quoted context omitted.

I highly doubt going to Mars is the reason space x is still private. Given that astronauts have shown somewhat serious issues after being in space for six months, it’s unlikely the human body could survive three years in zero gravity without serious damage. Which means that a space flight to Mars would also require some form of artificial gravity and so for our lifetimes, is likely going to remain science fiction. No…

Where'd you get the idea that a Mars trip is going to involve three years of zero-G? A Hohmann transfer orbit (minimum energy) will get you there in nine months. SpaceX is targeting a higher energy, shorter trip that'll probably wind up being about six months each way (with Mars gravity in the middle).

I agree with you that the no-gravity part is likely doable with an acceptable risk.

What I haven't seen are actual solutions for how to deal with the radiation. Yes, there is ongoing research from NASA, ESA, JAXA and others, and lots of interesting proposals like hydrogenated boron nanotubes, electromagnetic force fields, lithium shields etc. But no solutions even close to implementation.

Here's from an ESA blog post on the topic earlier this year:

> As it stands today, we can’t go to Mars due to radiation. It would be impossible to meet acceptable dose limits.

http://esa.int/Science_Exploration/Human_and_Robotic_Explora...

Are we going to send astronauts who have accepted they will likely die from the mission? Is getting a person quickly to mars worth such a suicide trip?

The final issue I believe will be a hurdle is the psychology. It's one thing sending people to the moon for a few days, or to the ISS for half a yesr where they can look out the window at Earth every day. But I'm not sure the human mind is going to stand up well to the type of extreme isolation a trip to Mars requires. It's certainly never been tested before.

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