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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

#21

Post by asfarley »

Traster wrote: post #12

It's very difficult to see how SoftBank breaks even on this new deal. They're investing $5bn now, with the hope that it's worth more than that when they IPO, but several things have killed that idea. Firstly, their brand is tarnished. Secondly, the growth play will be gone by the time they IPO. Thirdly, the charismatic leader is gone, so the message of "Disrupting" and "We're a tech play' is gone. They've put $5bn in…

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 despite not having worked at a big VC.

Re: SoftBank to take control of WeWork: Sources

#23

Post by ivalm »

thedudeabides5 wrote: post #15
newfangle wrote: post #11

Earlier quoted context omitted.

4 to 5 billion investment in a company with an 8 billion dollar valuation. At some point you have to wonder when its better to cut your losses and scrap the entire thing.

I mean, if you liked 20% ownership at 50bn, you prob love 70% ownership at $8bn. This is where the value of all that liquidation preference kicks in. At some point it becomes in SoftBanks interest to push for lower valuation, as it means they get to wipe out all the people that came before.

But the reason they liked 20% ownership at $50bn is presumably because they thought they can cash-out at $80bn+. This cash-out valuation was not value-based but growth/hype-based. It seems that weworks will no longer be valued on growth/hype, which means that the value of weworks is much lower.

Liking 20% ownership at 50bn doesnt mean you like 70% ownership at $8bn. The value of the company had significant future growth/hype component which required other investors to pour additional money in to keep up the growth, that is now gone.

Re: SoftBank to take control of WeWork: Sources

#25

Post by philip1209 »

Traster wrote: post #12

It's very difficult to see how SoftBank breaks even on this new deal. They're investing $5bn now, with the hope that it's worth more than that when they IPO, but several things have killed that idea. Firstly, their brand is tarnished. Secondly, the growth play will be gone by the time they IPO. Thirdly, the charismatic leader is gone, so the message of "Disrupting" and "We're a tech play' is gone. They've put $5bn in…

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 acquisitions, and focus on the core business instead of side projects. After a few years of being "boring" and improving margins, then they ostensibly will look like a much more stable investment to public markets.

[1] https://a16z.com/2011/04/14/peacetime-ceowartime-ceo-2/

Re: SoftBank to take control of WeWork: Sources

#26

Post by threeseed »

natrik wrote: post #14
threeseed wrote: post #9

Earlier quoted context omitted.

And is now worth $23B. So I would assume he knows a little about business.

I'd argue that assumption, [correlation of: current net worth -> knowledge about business], is flawed logically.

You do understand how he made that money right ?

Knowledge about business -> Current net worth

Re: SoftBank to take control of WeWork: Sources

#27

Post by hn_throwaway_99 »

newfangle wrote: post #11
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-...

4 to 5 billion investment in a company with an 8 billion dollar valuation. At some point you have to wonder when its better to cut your losses and scrap the entire thing.

Furthermore, according to https://craft.co/wework/funding-rounds, WeWork has already received $12 billion plus in equity investments (not counting debt raises). Softbank alone has already put in $9.4 billion in equity + $1 billion in debt.

So it looks like they've already destroyed $4 billion+ in value. I'm curious how the more financially astute than I see this as anything besides throwing good money after bad?

Re: SoftBank to take control of WeWork: Sources

#30

Post by bduerst »

threeseed wrote: post #18
newfangle wrote: post #11

Earlier quoted context omitted.

4 to 5 billion investment in a company with an 8 billion dollar valuation. At some point you have to wonder when its better to cut your losses and scrap the entire thing.

WeWork is the dominant player as the overwhelming trend in business is towards flexible and remote working. If even a small percentage of companies adopt the Gitlab model, WeWork is going to be extremely successful. And given Softbank's business model is designed for long term, strategic bets there is no way I would be cutting losses just yet.

Softbanks model isn't proven yet. They overinvest and create unicorns in the expectation that the 10x extra cash will cement market leadership for the startup.

That doesn't mean much if the market does not materialize, which is possible because remote work does not require shared office space. Currently the trend is that connectivity removes the need for an office entirely, not generate more demand for them.

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