WeWork Gets a Visit from Financial Reality • Hacker News Board

Re: WeWork Gets a Visit from Financial Reality

#31

Post by fhbdukfrh » Tue, Jan 08, 2019, 4:17 PM UTC

scandox wrote: post #5

Traster wrote: post #4

>The Gulf investors backing the Vision Fund seem to have decided that WeWork is not a tech bet but simply an aggressive punt on real estate. This is the bogey man of a huge number of current 'tech startups' - What if it turns out Tesla really are a car company! Or if We Work are actually an office rental company! OR gasp Uber is a cab company! (1) We now have a glut of companies operating in traditional markets that…

In 1999 there was an email going round about how ridiculous dotcom valuations were. Taking Amazon, I think, as an example it said it would have to earn more than Kodak, Boeing, Caterpillar etc to ever be worth it's valuation. There was a general sense of "it's just a bookstore". Now I know everything is more mature and the situation is different, but I also remember feeling very confident that Amazon was waaay overva…

That's pretty revisionist as to the actual reality. The vast majority where incredibly overvalued internet plays on traditional markets, exactly what the gp warns. You just picked one of the few that survived and thrived. Don't overestimate how inevitable it was that we ended up with the Amazon we see today.

The biggest difference I see this time is these unicorns have actual revenue. Heavily subsidized but revenue still. Last time we had monster companies that didn't even show that given 2 dollars they could make 1, so progress?

Re: WeWork Gets a Visit from Financial Reality

#32

Post by busterarm » Tue, Jan 08, 2019, 4:17 PM UTC

projectramo wrote: post #19

Traster wrote: post #4

>The Gulf investors backing the Vision Fund seem to have decided that WeWork is not a tech bet but simply an aggressive punt on real estate. This is the bogey man of a huge number of current 'tech startups' - What if it turns out Tesla really are a car company! Or if We Work are actually an office rental company! OR gasp Uber is a cab company! (1) We now have a glut of companies operating in traditional markets that…

You're right on Tesla and WeWork, but not on Uber. Uber doesn't buy and own the car, which means it requires much less capital. This small change has many implications, and the tech helps solves many of the problems that come up. I am not saying it is properly valued (over or under or whatever). Just that given the choice between an Uber (or Lyft or yourlocalapp.com) or a cab company with the same fleet, customers, a…

Uber has been financing driver car purchases for years. They might as well own the car.

Re: WeWork Gets a Visit from Financial Reality

#33

Post by addajones » Tue, Jan 08, 2019, 4:17 PM UTC

sachinprism wrote: post #9

I feel like WeWork would be one of the first companies to go under in case a recession hits the US market. Everyone who works there is probably going to decide en masse that they can do the same things from home or a Starbucks

Sounds about right. Spent a couple years at a WeWork in Los Angeles. It's a luxury, a glorified co-working community. People enjoy the beer. One shake of the economy and everybody will cut WeWork and go back home or somewhere considerably more affordable.

Re: WeWork Gets a Visit from Financial Reality

#34

Post by projectramo » Tue, Jan 08, 2019, 4:18 PM UTC

blang wrote: post #24

projectramo wrote: post #19

Earlier quoted context omitted.

You're right on Tesla and WeWork, but not on Uber. Uber doesn't buy and own the car, which means it requires much less capital. This small change has many implications, and the tech helps solves many of the problems that come up. I am not saying it is properly valued (over or under or whatever). Just that given the choice between an Uber (or Lyft or yourlocalapp.com) or a cab company with the same fleet, customers, a…

>Uber doesn't buy and own the car, which means it requires much less capital. I don't think this is true with one of the major things they have been selling investors for years: self-driving cars. That certainly requires a lot of capital to pull off, and I think they plan is they would own those cars.

If Uber pulls off self-driving cars, I would argue:

1. It is not the same business model it currently has

2. It has an even stronger claim to not being a traditional cab company, and for being a "true" technology company

In that case they would have capital costs (perhaps even higher), but would eliminate labor costs.

Re: WeWork Gets a Visit from Financial Reality

#35

Post by bilbo0s » Tue, Jan 08, 2019, 4:18 PM UTC

bryanlarsen wrote: post #25

ironcan wrote: post #8

Earlier quoted context omitted.

On the flip side, if it wasn't Amazon mentioned but pets.com, they were entirely right.

I guess the right question is, was a basket containing Amazon.com, pets.com and all the rest overvalued? Amazon is up about 15X since its peak before the crash, the dow is at 3X over the same period. So as long as AMZN was >= 20% of your basket, then it was fairly valued. Sounds about right.

>So as long as AMZN was >= 20% of your basket...

and there's the rub, knowing, a priori, what the proper balance should be.

Re: WeWork Gets a Visit from Financial Reality

#36

Post by code4tee » Tue, Jan 08, 2019, 4:19 PM UTC

It will be interesting how this all plays out.

WeWork’s model wasn’t new (Regis has been doing real estate subdivision arbitrage for years) they just made that model cooler and added some free beer and a few other perks but it’s still the same business. Someone from WeWork recently told me they are a digital experiences company and not a real estate company. Increasingly the market seems to be calling BS on that.

There’s very much a demand for WeWork type services and it meets a real need but it’s a low margin low multiple real estate arbitrage play not a high multiple tech play. WeWork has way too many people and far too much overhead relative to the business they are actually in despite pretending to be something else.

WeWork also seems to be getting very unfocused buying up lots of other businesses and getting way beyond their core real estate play. Given that, shifting market views and their extreme leverage with long term leases I wish them well but this could get real ugly real quick.

Re: WeWork Gets a Visit from Financial Reality

#37

Post by whatok » Tue, Jan 08, 2019, 4:20 PM UTC

freewilly1040 wrote: post #23

CodeSheikh wrote: post #6

"The Gulf investors backing the Vision Fund seem to have decided that WeWork is not a tech bet but simply an aggressive punt on real estate." If you have earlier invested in WeWork as a tech startup then one should be questioning your investment strategies and research methods.

Probably not a bad idea for SoftBank... even this headline is funny, Sotbank has decided against a _ludicrously large_ investment in favor of a _still very large_ one

SoftBank did not decide against it. SoftBank's Vision Fund investors decided against it so SoftBank itself invested instead of the Vision Fund.

Re: WeWork Gets a Visit from Financial Reality

#38

Post by projectramo » Tue, Jan 08, 2019, 4:21 PM UTC

busterarm wrote: post #32

projectramo wrote: post #19

Earlier quoted context omitted.

You're right on Tesla and WeWork, but not on Uber. Uber doesn't buy and own the car, which means it requires much less capital. This small change has many implications, and the tech helps solves many of the problems that come up. I am not saying it is properly valued (over or under or whatever). Just that given the choice between an Uber (or Lyft or yourlocalapp.com) or a cab company with the same fleet, customers, a…

Uber has been financing driver car purchases for years. They might as well own the car.

No, I don't agree with that logic. Credit risk is not the same as the risk on owning the asset.

Your bank might lend you money to buy a house based on your excellent credit and your large downpayment. That does not mean they want to rent out your home, speculate on home prices etc.

They may end up doing some of this tangentially (they have to dispose of the house if you end up not paying) but that is not the same business.

Re: WeWork Gets a Visit from Financial Reality

#39

Post by sky_rw » Tue, Jan 08, 2019, 4:24 PM UTC

sachinprism wrote: post #9

I feel like WeWork would be one of the first companies to go under in case a recession hits the US market. Everyone who works there is probably going to decide en masse that they can do the same things from home or a Starbucks

Or better yet, realizing spending $60k/year for three years on over-priced month to month office space is not always a better solution than signing an old-school lease.

Re: WeWork Gets a Visit from Financial Reality

#40

Post by rchaud » Tue, Jan 08, 2019, 4:24 PM UTC

scandox wrote: post #5

Traster wrote: post #4

>The Gulf investors backing the Vision Fund seem to have decided that WeWork is not a tech bet but simply an aggressive punt on real estate. This is the bogey man of a huge number of current 'tech startups' - What if it turns out Tesla really are a car company! Or if We Work are actually an office rental company! OR gasp Uber is a cab company! (1) We now have a glut of companies operating in traditional markets that…

In 1999 there was an email going round about how ridiculous dotcom valuations were. Taking Amazon, I think, as an example it said it would have to earn more than Kodak, Boeing, Caterpillar etc to ever be worth it's valuation. There was a general sense of "it's just a bookstore". Now I know everything is more mature and the situation is different, but I also remember feeling very confident that Amazon was waaay overva…

Well, back then the capital markets were all about value investing. And if someone in 1999 told you that a publicly traded company could run losses for 15 years straight and be 'successful', you'd have looked at him as though he were a fool.

'Valuation' these days seems to be less about determining the free cash flow of a company's operations. It's the promise of great innovation that's just around the corner. Or, more likely, it's the promise that a bigger company will acquire this company at a markup above whatever you paid.