WeWork Bonds Drop Below Par for First Time Since IPO Filing • Hacker News Board

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

#21

Post by [deleted] » Tue, Sep 10, 2019, 2:25 PM UTC

whatshisface wrote: post #12

code4tee wrote: post #8

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.

[deleted]

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

#22

Post by [deleted] » Tue, Sep 10, 2019, 2:25 PM UTC

sephamorr wrote: post #16

whatshisface wrote: post #12

Earlier quoted context omitted.

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.

Plenty of sovereign debt interest rates are below zero, so you'd pay $101 for $100 in a year's time. Whether or not this is sane economic policy is a question though.

[deleted]

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

#23

Post by whatshisface » Tue, Sep 10, 2019, 2:25 PM UTC

chadash wrote: post #15

whatshisface wrote: post #12

Earlier quoted context omitted.

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.

German bond yields are currently negative. That means that you pay them more than $100 for every $100 you get back. See https://www.bloomberg.com/markets/rates-bonds/government-bon...

There is actually an important detail here: that's €101, not $101. If you want to transact in dollars there would be no reason not to deal with the US Treasury which is even safer than the German government (Germany can't print Euros to fulfill its debt obligations).

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

#24

Post by gamblor956 » Tue, Sep 10, 2019, 2:28 PM UTC

chadash wrote: post #14

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…

> 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…

Regus was very well known in professional communities, i.e., lawyers, accountants, consultants, before WeWork. Especially during the recession it was a great, professional looking place to meet with clients without the overhead of an office lease.

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

#25

Post by JackFr » Tue, Sep 10, 2019, 2:28 PM UTC

code4tee wrote: post #8

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…

These bonds have traded below par for a year. The S-1 somehow gave them a pop. If the S-1 is shelved presumably they'll go back to where they were.

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

#26

Post by duxup » Tue, Sep 10, 2019, 2:28 PM UTC

chadash wrote: post #14

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…

> 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…

I wonder if by more people knowing about these options because of WeWork ... if more are actually doing more of it who weren't already?

There could be some value there, maybe, but I've looked at WeWork in my area and it's expensive... for having to share a lot of space. It seems like a high bar to get folks into that.

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

#27

Post by zpwm » Tue, Sep 10, 2019, 2:32 PM UTC

whatshisface wrote: post #12

code4tee wrote: post #8

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.

US Treasury 30 year bonds are currently priced over $102.... Calling a bond an IOU doesn't really make sense because you neglect the coupon payments (annual interest). So even though you're paying over $100 to get paid back a $100 principal the yield is still positive because of those coupon payments. Negative yield bonds also exist and are bought for various reasons.

"There isn't an institution in the world that could sell an IOU $100 for $100" is not true

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

#28

Post by whatok » Tue, Sep 10, 2019, 2:32 PM UTC

JackFr wrote: post #25

code4tee wrote: post #8

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…

These bonds have traded below par for a year. The S-1 somehow gave them a pop. If the S-1 is shelved presumably they'll go back to where they were.

The S1 gave them a pop because there was a disclosure that they bought back 33mm.

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

#29

Post by nradov » Tue, Sep 10, 2019, 2:32 PM UTC

linuxftw wrote: post #6

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…

> It does not seem to be a viable business so this makes sense. Many businesses that IPO aren't viable, the problem is when the general public figures that out. For instance, snap chat. In no way a viable business, but has plenty of investors thanks to the wall street scam of institutional investors (401ks, etc) buying entire sectors of an exchange. It's a nice scheme to ensure you bail out your 'venture capitalist'…

The vast majority of 401(k) money is in large-cap mutual funds which don't invest in IPOs.

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

#30

Post by whatshisface » Tue, Sep 10, 2019, 2:34 PM UTC

zpwm wrote: post #27

whatshisface wrote: post #12

Earlier quoted context omitted.

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.

US Treasury 30 year bonds are currently priced over $102.... Calling a bond an IOU doesn't really make sense because you neglect the coupon payments (annual interest). So even though you're paying over $100 to get paid back a $100 principal the yield is still positive because of those coupon payments. Negative yield bonds also exist and are bought for various reasons. "There isn't an institution in the world that cou…

That's a good point, but I think you can get one-year bonds with an annual coupon: that means you get one payment a year from now. So bonds in general aren't IOUs, but there is at least one bond that works like one.