The thing that's the most upsetting about this is that our 401k, pension funds, city funds will all end up buying this garbage.
The We Company S-1
231–240 of 346 posts
Re: The We Company S-1
#232WeWork has $33.9 Billion in Non-canceable lease commitments, and it's lease payments are increasing 100% YoY. I think that is the true ticking time bomb for this company. In a world where billion dollar losses (Uber) seems somewhat normal, those lease obligations are still outrageous, and those payments will come due eventually, whether they have the money or not. In 2019 they attributed over $800 Million to operatin…
Seems like they are pretty much levered to the hilt. What happens when the current bubble bursts (or even just deflates) and their occupancy rate declines?
Their business model seems to be selling short term leases and buying long term leases. This is all fine and dandy as long as they can find enough buyers for the short term commitments, but the distribution of almost all such strategies tends to be heavily tailed. You basically collect a small but consistent margin and occasionally suffer heavy and unavoidable losses.
That's a perfectly fine strategy if the company can stay solvent during the loss, but this seems far from certain in case of WeWork.
Re: The We Company S-1
#233Earlier quoted context omitted.
To do what? I'm not too familiar with them but what more do they have other than a website to look at potential spaces with some photos and a description and sign up for one? Maybe process payments as well?
Helpdesk software and room booking. But yeah _1000_ people in product development sounds absurd for "We".
Especially at their scale. A team of 20 could run a Facebook-like experience for 1 million people. Things get much harder after that, but Wework isn't close to the scale where you need more people because things are harder.
Re: The We Company S-1
#234If you wanna put those financials in perspective... We Company financials chart: https://imgur.com/a/Xky1NNh
It seems like they need to charge more or operate a leaner operation. Even after excluding marketing and sales expenses, they’re still not profitable. They also apparently have 12k employees, which is way too high.
Re: The We Company S-1
#235A Bloomberg columnist's reaction on Twitter:
"I have only read the related party section in the WeWork IPO filing so far, and I am not kidding that it is THE MOST BANANAS THING I HAVE EVER READ."
Re: The We Company S-1
#236Earlier quoted context omitted.
Yes, under "related party transactions": https://www.sec.gov/Archives/edgar/data/1533523/000119312519... "We are party to lease agreements for four commercial properties with landlord entities in which Adam has an ownership interest..."
> Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator... Is this a normal sort of thing to see in such a filing? He's being referred to by his first name and heaped with praise.
It’s not normal, and neither is WeWork, nor Adam himself. There’s something of a cult around him: https://news.ycombinator.com/item?id=20149800
Re: The We Company S-1
#237Earlier quoted context omitted.
Thanks. But isn't making a claim that it's plausible that every square inch of office space in every modern city will be managed by WeWork actually doing the opposite of identifying some of the obvious limits to scaling? I suppose some of this is addressed elsewhere under other sections, and the fact that it's called the Total Addressable Market explains a lot, but it does seem remarkably arbitrary and to be of very…
They aren't making that claim though. They are just doing simple back of the envelope math using their current metrics, but in word form. No one is suggesting that those numbers will actually be achieved.
In this context, what is the value of stating these numbers?
Re: The We Company S-1
#238Earlier quoted context omitted.
WeWork's litigation counsel might have wanted the pitch-deck stuff to go into the S-1 to make the information more understandable to non-business people. That way, the pitch deck would be an official part of the record; in turn, this would mean a couple of things: 1. If disgruntled investors were to sue WeWork, the pitch-deck material could be referred to by WeWork's counsel in tactical maneuvering such as a motion f…
Yeah, except that's not how this works outside the theoretical realm. In practice, those that actually took companies public know that the more terrible crap you throw into the S-1 ( pitch deck included ) as long as you state that risk-wise you are probably a terrible investment for the public, the better protected you are from the lawsuits in the future when the public's investment does not pan out: you say 'we are…
Personally I prefer the dry version of SEC fillings. More to the point and with less marketing and PR crap. Also shows you that the finance department is filled with dry professionals, and as much as these finance people can be a pain less professional ones are real curse especially if form matters more than function. Like at my current gig which apparently won an award for their annual reports, the report mind you and not the reported figures. I tried reading it, if you ask me at least 75% are fluff and of the reminder a lot is just lacking substance.
Re: The We Company S-1
#239tl;dr This dude, through various financial shenanigans, is loaning himself hundreds of millions of dollars to buy real estate and lease it back to WeWork. He then pays the loans off by issuing shares of We Work stock. Nothing is illegal about this, but it stinks to high heaven. But hey, he doesn't draw a salary as CEO!
From the Company Loans Section:
In May 2013 and February 2014, we issued loans to WE Holdings LLC for $10.4 million (interest rate 0.2% per year; maturity May 30, 2016) and $15.0 million (interest rate 0.2% per year; maturity February 4, 2017), respectively. The loans were collateralized by shares of our capital stock held by We Holdings LLC, and each loan provided us with the option to purchase a number of these shares in full settlement of the applicable loan. We exercised these options in May 2016, purchasing and retiring an aggregate of 8,398,670 shares of our capital stock in full settlement of the loans.
In June 2016, we issued a loan to Adam totaling $7.0 million (interest rate of 0.64% per year; maturity June 14, 2019). In November 2017, Adam repaid the loan in full, including $0.1 million in interest, in cash.
Then from the Properties Leased to The We Company section:
During the years ended December 31, 2016, 2017 and 2018, we made cash payments totaling $3.1 million, $5.6 million and $8.0 million to the [CEO] under these leases.
Sounds like they are straight up loaning the CEO money so he can buy buildings and lease them back to the We Company. Bonkers.
From the Personal Loans section:
Adam currently has a line of credit of up to $500 million with UBS AG, Stamford Branch, JPMorgan Chase Bank, N.A. and Credit Suisse AG, New York Branch, of which approximately $380 million principal amount was outstanding as of July 31, 2019. The line of credit is secured by a pledge of approximately [BLANK] shares of our Class B common stock beneficially owned by Adam.
From the WPI Fund and ARK section:
We have entered into operating lease agreements with [the CEO] in which the WPI Fund (or, following the ARK/WPI combination, other real estate acquisition vehicles managed or sponsored by ARK) have an interest, on what we believe to be commercially reasonable terms no less favorable to us than could have been obtained from unaffiliated third parties. During the years ended December 31, 2016 and 2017, no rent expense or cash payments had been recognized by us relating to these agreements as we were not yet occupying any properties owned by these entities and had not paid any rent under these leases. During the year ended December 31, 2018 and the six months ended June 30, 2019, we made cash payments totaling $0.0 million and $0.6 million, respectively, and we recognized
From Personal Real Estate Transactions section:
With respect to the six properties not currently occupied by the Company, in connection with exercising its option to acquire a property in the first year of the management agreement, the ARK Manager and the Company may determine that a subsidiary of the Company should occupy any of such properties to the extent the ARK Manager and the Company agree on terms of any such occupancy agreement.
Re: The We Company S-1
#240Earlier quoted context omitted.
> Adam is a unique leader who has proven he can simultaneously wear the hats of visionary, operator and innovator... Is this a normal sort of thing to see in such a filing? He's being referred to by his first name and heaped with praise.
Adam is extraordinarily humble. Everyone, including Adam, would never exaggerate. Adam is a part of everything. He is in the sky and sea. He is in the dreams of children at night. He is all that there is, forever.
He is We.