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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

#61

Post by OnlineGladiator »

wutbrodo wrote: post #41
OnlineGladiator wrote: post #39

Earlier quoted context omitted.

How do you consider Boston Dynamics successful? They are continually sold to new owners because nobody knows how they can generate a profit. SpaceX likewise is also in a somewhat murky financial position, although I suspect they will come out doing great in the future. My limited understanding is they are avoiding an IPO because their financials are not up to snuff. AirBnB was heavily derisked before serious investor…

> They are continually sold to new owners because nobody knows how they can generate a profit. They were founded in 1992, were bought by Google and then sold to Softbank. I don't think that qualifies as "continually sold", particularly when the buy-and-seller was Google. I'm not as negative on Google's acquisition strategy as many here, but Google selling companies a few years after acquisition is hardly unheard-of.

Fair point, the way I said it exaggerated the issue. But I still think any company sold more than once has an issue. Boston Dynamics was first sold to Google, and then sold to Softbank - so they meet my criterion.

Re: SoftBank to take control of WeWork: Sources

#62

Post by duxup »

asfarley wrote: post #21
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 despi…

I don't see why someone with that history would necessarily do a poor job.

Re: SoftBank to take control of WeWork: Sources

#63

Post by carty76ers »

ratww wrote: post #55
acchow wrote: post #45

Earlier quoted context omitted.

> like paying 100% commission to real estate agents. Why did they do this?

To grow faster and disrupt the market. For a while it was more than a simple commission: it was 100% of the revenue for a whole year. They were also offering one-year free rent to new customers. Source: https://outline.com/yCcgS5

That has to be the most ridiculous thing I’ve ever heard, since Enron paid their employees bonuses for unprofitable deals.

Re: SoftBank to take control of WeWork: Sources

#64

Post by hilbertseries »

ivalm wrote: post #47
nihonde wrote: post #38

Earlier quoted context omitted.

They basically bought control of the company for ~$15B. Any valuation north of $20B ought to put them in the black.

Big Edit: multiplying is hard, forgot to multiply by the PE ratio! Actually, potential valuation is 660B.. so 20% would mean 3% of US office real estate business. At a less generous pe of ~10 (perhaps more appropriate given they don't own the buildings), it would be about 10% of real estate market. ------ Sure, but $20B valuation seems hard to achieve. US commercial real estate market by revenue is ~$1.1T [0] Office…

Don’t you need to multiply that 22B by 30, or did you get all of those references but you don’t understand the difference between profit and valuation...

Re: SoftBank to take control of WeWork: Sources

#65

Post by OnlineGladiator »

duxup wrote: post #62
asfarley wrote: post #21

Earlier quoted context omitted.

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 despi…

I don't see why someone with that history would necessarily do a poor job.

I think his point is an insider can't see the forest through the trees, and you need a fresh perspective to understand what's really happening. Basically that hiring an insider just perpetuates the echo chamber.

Re: SoftBank to take control of WeWork: Sources

#66

Post by kss238 »

ivalm wrote: post #47
nihonde wrote: post #38

Earlier quoted context omitted.

They basically bought control of the company for ~$15B. Any valuation north of $20B ought to put them in the black.

Big Edit: multiplying is hard, forgot to multiply by the PE ratio! Actually, potential valuation is 660B.. so 20% would mean 3% of US office real estate business. At a less generous pe of ~10 (perhaps more appropriate given they don't own the buildings), it would be about 10% of real estate market. ------ Sure, but $20B valuation seems hard to achieve. US commercial real estate market by revenue is ~$1.1T [0] Office…

What about the 30x earnings multiple? Shouldn't it be $22B*30?

So WeWork "only" needs to capture ~3% of the US market to be worth $20B

Re: SoftBank to take control of WeWork: Sources

#67

Post by xenospn »

anm89 wrote: post #53
xenospn wrote: post #51

So who exactly came to the conclusion that they were worth >40B just a few weeks before? How does that math even hold up?

Simple, someone gave them money at that valuation (softbank). It doesn't mean the underlying value exists but it does give them that "valuation"

Obviously - but why did Softbank think it was worth so much more? They were an investor - they knew that the company was a financial black hole.

Re: SoftBank to take control of WeWork: Sources

#68

Post by flukus »

asfarley wrote: post #21
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 despi…

Considering their current vetting is quite lacking, shouldn't they be looking to hire someone experienced? You don't hire a junior engineer to build you're new enterprise system.

Re: SoftBank to take control of WeWork: Sources

#69

Post by ian0 »

hn_throwaway_99 wrote: post #27
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.

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?

The underlying value of a company can diverge from its valuation. While obviously this happened when they pitched a $50bn valuation, it could also be happening here. IE Softbank thinks the value is way higher than 8Bn but forced a low valuation as to buy up as much stock as possible.

Re: SoftBank to take control of WeWork: Sources

#70

Post by hilbertseries »

nostrademons wrote: post #60
OnlineGladiator wrote: post #39

Earlier quoted context omitted.

How do you consider Boston Dynamics successful? They are continually sold to new owners because nobody knows how they can generate a profit. SpaceX likewise is also in a somewhat murky financial position, although I suspect they will come out doing great in the future. My limited understanding is they are avoiding an IPO because their financials are not up to snuff. AirBnB was heavily derisked before serious investor…

> My limited understanding is they are avoiding an IPO because their financials are not up to snuff. My understanding is that they're avoiding an IPO because it would jeopardize SpaceX's mission of getting to Mars. When they're privately held, Musk can vet investors to be sure that they're aligned with SpaceX's mission, or ensure that they're powerless enough that they can't make problems if they're not (eg. no board…

I highly doubt going to Mars is the reason space x is still private. Given that astronauts have shown somewhat serious issues after being in space for six months, it’s unlikely the human body could survive three years in zero gravity without serious damage. Which means that a space flight to Mars would also require some form of artificial gravity and so for our lifetimes, is likely going to remain science fiction.

No, Musk is going to keep SpaceX private because he hates public oversight, like the kind he’s gotten with Tesla.

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