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WeWork Warns of Possible Bankruptcy

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Re: WeWork Warns of Possible Bankruptcy

#31

Post by JumpCrisscross »

leroman wrote: post #28

Several years ago while hustling as a single founder, I hoped to get a desk in a private office (anything but open-space), so I would have a place to come to to focus on work, socialize and feel at work.. So I went to see what WeWork have to offer. There I saw a nice floor with nice looking private offices, finally taken to what they thought might be relevant for me, they showed me a tiny space where half a diner tab…

> how greedy and disconnected WeWork are…what you get when you get an MBA type business management constantly

Apparently not greedy nor MBA enough!

Re: WeWork Warns of Possible Bankruptcy

#32

Post by rcme »

sarreph wrote: post #27
mirekrusin wrote: post #18

Earlier quoted context omitted.

They probably enter into long term lease for the building they can’t get out overnight?

Good point - goes to show it’s always easier to criticise behemoths like this from the outside. However, I wager that they have had long enough to plan around this one - _surely_ there are a non-negligible amount of leases they can trade or sell on / do something with as most WeWork locations are in highly desirable spots.

Isn’t this a microcosm of the broader story with commercial real estate? Values are down massively. Trying to break the lease is like realizing those losses for WeWork.

Re: WeWork Warns of Possible Bankruptcy

#33

Post by fredgrott »

PedroBatista wrote: post #11

Should have happened in 2021 but our "brightest VC minds" thought it would be a good idea to burn even more "free" money on this pit. To be fair, WeWork is just another roll of the dice company from the Uber era of free money. Let's pump it up and become too-big-to-fail! It appears WeWork wasn't big enough.. And they can blame COVID all they want, but the business model was already showing sights of failure before 20…

We need to be more detailed about this as it highlights a demographics problem underlying it....

1. Free Money was the tail end of boomers investments pools 2. There will be a 12-year gap until the next investments pools increase from the new workers entering the working market. 3. Next investments pool increase from the new worker cohorts group will be smaller than the boomers.

All this indicates that the strategy of throw money at getting monopoly of market is sun setting and VCs will now have to have the slow growth strategy in their toolbox.

That also means potential founders now need to have that in their toolbox, things to look for:

1. Founders getting creative and partnering up with older experienced people in the domain they are creating their product in.

Re: WeWork Warns of Possible Bankruptcy

#34

Post by JumpCrisscross »

sarreph wrote: post #27
mirekrusin wrote: post #18

Earlier quoted context omitted.

They probably enter into long term lease for the building they can’t get out overnight?

Good point - goes to show it’s always easier to criticise behemoths like this from the outside. However, I wager that they have had long enough to plan around this one - _surely_ there are a non-negligible amount of leases they can trade or sell on / do something with as most WeWork locations are in highly desirable spots.

> they have had long enough to plan around this one

WeWork’s core model has always been borrowing long and lending short; they are inherently vulnerable to a sharp spike down in commercial rents.

Apart from financially hedging that, or penning fancy outs when they signed their leases, it’s tough to see how even prescience a few years ago could have saved them. And that’s amidst Silicon Valley’s attitude in 2021-22 that the Fed couldn’t—not wouldn’t, couldn’t—raise rates or else America would go bankrupt or some nonsense.

Re: WeWork Warns of Possible Bankruptcy

#35

Post by rchaud »

VC capitalism over the past decade resembles the free spending era of Communist central planners tasked with rapidly industrializing their economies.

1) Dump enormous amounts of zero-interest capital into {{ sector }}

2) Entrust leadership to charismatic politicians rather than domain experts (Adam Neumann)

3) Craft a PR narrative emphasizing innovation and diminishing critics (Softbank "Vision Fund", "swinging for the fences", "transformational" )

4) Construct Potemkin villages to show the world that all is well (going public)

5) ...followed by eventual rapid decline and collapse

WeWork is the most egregious example, but the same fate awaits the likes of UberEats and Lime and what have you.

Re: WeWork Warns of Possible Bankruptcy

#36

Post by JumpCrisscross »

rchaud wrote: post #35

VC capitalism over the past decade resembles the free spending era of Communist central planners tasked with rapidly industrializing their economies. 1) Dump enormous amounts of zero-interest capital into {{ sector }} 2) Entrust leadership to charismatic politicians rather than domain experts (Adam Neumann) 3) Craft a PR narrative emphasizing innovation and diminishing critics (Softbank "Vision Fund", "swinging for t…

It makes sense to divide late-stage, large-cheque VC from classic early-stage, small-cheque VC in the same way we separate money-losing, unlevered PE from classic cash-flow positive, leveraged PE. (Hint: the latter are the same.)

Re: WeWork Warns of Possible Bankruptcy

#37

Post by bhouston »

I do not understand why Adam Neumann got that massive exit settlement from We Work?

> WeWork founder Adam Neumann received $245m in company stock [....] In addition to the $245m grant, Neumann received $200m in cash, was able to refinance $432m in debt on favorable terms, and allowed a finance company controlled by the former chief executive to sell $578m in WeWork stock. [1]

That guy got incredibly rich creating a company that was clearly not viable and seems likely to bankrupt. Corporate government seems to be non-existent here.

Who are the people that are left holding the bag? Hopefully it is mostly just private money like the Saudis + SoftBank (if they screw up, they suffer the consequences, that is great) and not public pension funds. Otherwise, the public fund managers should go after this complete lack of governance and oversight.

[1] https://www.theguardian.com/business/2021/may/27/wework-foun...

Re: WeWork Warns of Possible Bankruptcy

#38

Post by nologic01 »

The era of cheap money is frequently invoked to explain this grand fiasco but macroeconomic variables have the same relation with any specific project that climate change has with an unusual heat wave.

Due diligence, focus on good governance etc are more directly influential in weeding out dodgy propositions and these behavioral aspects need not be closely correlated with any risk-free momey rate.

Re: WeWork Warns of Possible Bankruptcy

#39

Post by paulcole »

abi wrote: post #21

Sad about this because I have a hot desk membership in New York, and it's an amazing experience that I'd probably pay more for honestly.

Funny you mention paying more, but they actually cut prices for many members recently.

In the past 6 months, WeWork split their buildings into 2 tiers. The All-Access pass at one tier is $149 and the other is $299. $299 also gets you access to both tiers of buildings.

I only go to the locations here in Portland and went from paying $299 a month to $149. They didn’t advertise this change to me, I had to find out from a friend who just signed up. I emailed the salesperson and asked why I wouldn’t make the change given my situation. He just replied defeatedly, “I’ll start the paperwork.”

Re: WeWork Warns of Possible Bankruptcy

#40

Post by bratgpttamer »

mirekrusin wrote: post #18
sarreph wrote: post #14

In my opinion the writing for a way out of this mess has been on the wall for a long time now, post-Covid. This is with the only viable, but still heavily under-utilized product they have left: hot-desking and community workspaces. Having rented multiple dedicated offices from WeWork I can attest that the corridors are become more and more like a post-apocalyptic landscape as the tenants — no longer taking advantage…

They probably enter into long term lease for the building they can’t get out overnight?

I do recall hearing that this is/was precisely their business model: given that rent always* goes up (and never* down), lock in rates with a 10- or 20-year lease, wait for rent to increase for other people, [???], profit.
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