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WeWork Warns of Possible Bankruptcy

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Re: WeWork Warns of Possible Bankruptcy

#61

Post by NoGravitas »

JumpCrisscross wrote: post #29
rvz wrote: post #16

It doesn't matter what happens to WeWork. Adam Neumann and the other VCs already exit scammed out of it with their millions and additionally dumped on retail. They successfully got away with it, despite knowing that the business has hundreds of millions of dollars of losses pre-IPO, which was over $900M+ [0]; the biggest of all red flags as I said 4 years ago. [1] This company could only exist in a cheap money era wi…

> Neumann and the other VCs already exit scammed out of it with their millions and additionally dumped on retail Given the outright fraud prevalent in today’s tech landscape, it’s difficult to call WeWork a scam. Stupid, yes. But fraud; for that we lack evidence.

It's a commercial property management company that identifies as a tech company to get dumb investment money. Maybe not outright fraudulent, but definitely scammy.

Re: WeWork Warns of Possible Bankruptcy

#62

Post by bhouston »

JacobAldridge wrote: post #51
bhouston wrote: post #37

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 c…

"Neumann’s ability to negotiate such rich terms was helped by the fact that his shareholdings controlled 10 times the votes of a normal shareholder, and he was able to argue for a higher price to cede control." Correctly or, more likely, not - it seems the payoff was made in early 2021 at a time when valuations were soaring and there was a renewed push for an IPO. Neumann could have blocked that. If I'm parsing a qui…

I was referring to the fiasco of 2019 where WeWork went from $50B to $5B while giving Adam Neumann a $1B payoff - did you miss that, it was on here all the time?

https://www.businessinsider.com/wework-ipo-fiasco-adam-neuma...

The SPAC merger (not IPO) in October 2021 at $9B but then it has continued to slide now down to $250M. That IPO does seem to be trying to get some value out of this turkey by passing it off to public investors.

There was never a viable business here, just hype. Going through its finances that are public, it has never made any money. Its net losses per year are roughly its income in most years. Its valuations were completely speculative.

Re: WeWork Warns of Possible Bankruptcy

#63

Post by londons_explore »

sarreph wrote: post #48
mdorazio wrote: post #43

Earlier quoted context omitted.

Commercial leases are usually 7 years. If they bought in during the go-go run in 2018-2019, they've still got years left. Breaking a commercial lease in good times is already very difficult (I was lucky to get out of one a year early in 2019 because I found someone to take it over that the landlord liked). And who would take over or sub the lease today? Everyone is trying to get out of their leases right now because…

Also good point. However, while commercial spaces in general are (as you say) underutilized, my gut feel (non-empirical here) from being in large cities is that there is somewhat of a boon for hot-desking / blurred-work-life-balance "office leisure spaces". Without having your experience of breaking a commercial lease, I would imagine one avenue to explore would be trying to offload some of these leases to emerging c…

Sure they could offload them (commercial leases are usually transferrable/sublettable),but if you offload them for pennies on the dollar, that looks really bad on the balance sheet.

Better to keep them and tell your shareholders that this is a temporary blip, and profits will be coming any day now...

Re: WeWork Warns of Possible Bankruptcy

#64

Post by cgeier »

I'm somewhat surprised by this. I'm currently working out of a WeWork and not only was it hard to get an office there, but they are constantly expanding the location I'm in and just opened the fourth location in a 1.5km radius. Cost is also rather high for a very small office (supposed to be for 4 persons, but if with 3 people it feels very crowded). The business of renting office space en masse and renting it out in smaller, much more expensive parts seems rather lucrative to me.

I'm in Hamburg, Germany for reference.

Re: WeWork Warns of Possible Bankruptcy

#65

Post by WJW »

LatteLazy wrote: post #9
WJW wrote: post #2

> The spectacular collapse of a company once valued by SoftBank at $40 billion has been years in the making, but is still surprising given the number of large commercial buildings around the world that don the company’s name. Is it actually surprising? If you too many assets that you bought with variable interest rate debt, then going bankrupt in a higher-interest-rate environment is exactly what I would expect.

Did they actually buy buildings? I thought they just took long term leases from owners and sold short term to their customers? I once read an article saying that for all the tech bs, weworks was basically just a (at the well timed) commercial rent play: fix low rent and then charge rising rents as the market goes up. I might be wrong though? I remember thinking it was like a bank (exposed to time risk) but with prope…

> fix low rent

This is not so easy as it sounds at scale, landlords aren't stupid. AFAICT, the main model is that WeWork simply charged more per desk/office/unit of surface area than they paid in rent to the building owner. This can intuitively work because they rent office space in bulk but rent out individual desks, and prices for individual "items" are almost always higher than buying in bulk. Obviously that model only makes a profit if you can maintain high occupancy rates though, and with COVID and rising interest rates the demand for expensive pay-as-you-go office space fell through the floor.

Through that lens WeWork is indeed like a bank: they rent long-term and rent out short-term. Companies like that are very vulnerable to a "run" where all the short term renters suddenly leave but the long term liabilities don't.

Re: WeWork Warns of Possible Bankruptcy

#66

Post by bhouston »

lotsofpulp wrote: post #57
bhouston wrote: post #37

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 c…

> . Otherwise, the public fund managers should go after this complete lack of governance and oversight. The public fund managers would be the ones guilty of not doing their due diligence.

SoftBank in particular seems to fund a lot of fraudsters. I wonder why? Just the number of total investments SoftBank makes or is there less DD? Just yesterday I saw this news: https://techcrunch.com/2023/08/04/softbank-sues-irl-over-ela...

Re: WeWork Warns of Possible Bankruptcy

#67

Post by JacobAldridge »

bhouston wrote: post #62
JacobAldridge wrote: post #51

Earlier quoted context omitted.

"Neumann’s ability to negotiate such rich terms was helped by the fact that his shareholdings controlled 10 times the votes of a normal shareholder, and he was able to argue for a higher price to cede control." Correctly or, more likely, not - it seems the payoff was made in early 2021 at a time when valuations were soaring and there was a renewed push for an IPO. Neumann could have blocked that. If I'm parsing a qui…

I was referring to the fiasco of 2019 where WeWork went from $50B to $5B while giving Adam Neumann a $1B payoff - did you miss that, it was on here all the time? https://www.businessinsider.com/wework-ipo-fiasco-adam-neuma... The SPAC merger (not IPO) in October 2021 at $9B but then it has continued to slide now down to $250M. That IPO does seem to be trying to get some value out of this turkey by passing it off to p…

Don't get me wrong - I never saw the value! Just answering the question.

Why in 2021 did they give him that payout? Likely because they thought it offered the best ROI moving forward (and for some shareholders, especially anyone who sold at the post-listing peak, it did).

It definitely wasn't recognition for past success.

Re: WeWork Warns of Possible Bankruptcy

#68

Post by HWR_14 »

dschuetz wrote: post #59
WJW wrote: post #50

Earlier quoted context omitted.

Working space. You can rent a single desk or multiple, and they charge you money every month. Bog standard stuff, has been done a million times all over the world. The problem for WeWork is that they chose to grow incredibly fast, positioned themselves a a very high-end premium type of service, and funded it all with lots of debt and VC (mostly SoftBank) investments, despite nearly every financial professional warnin…

Ah, essentially they are selling office desks to start-ups who don't need them anymore post-covid. Sounds bulletproof to me /s. I think that many fast-growing start-ups have decided that it's cheaper and safer to work from home, so maybe WeWork needs to start working and look for other sources of revenue. or do nothing and implode.

No, you're misunderstanding. First, they sold a lot to established companies who would get a whole office in the building to seem cool. I believe that's where most of the profits came from. The startup/hotdesking was there as well, but I don't believe it was as profitable. Otherwise, WFH would be a boon to them. Companies have paid for WeWork desks for their WFH employees/meetings to avoid needing office space. They would be doing great now.

The problem is their business model was to sign long-term leases with buildings and short-term leases with their customers. So they are paying 2018-2020 rates on office space, but leasing out at spot rates of 2023 office space.

Re: WeWork Warns of Possible Bankruptcy

#69

Post by smileysteve »

Aeolun wrote: post #46
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…

Their dedicated office space is just absurdly expensive. I'd pay $2000/month for a 10sqm office when I can get a 20sqm office from the market for $1000/month. Of course the locations are not equivalent, but it's just not really relevant for those of us working remote anyway.

But $1000 a month seems cheap compared to an office manager?

That is, a dedicated employee for receiving, kitchen stocking, security management, and even utility management (how many novice office managers try cable Internet before buying fiber)

Re: WeWork Warns of Possible Bankruptcy

#70

Post by ethbr0 »

JacobAldridge wrote: post #51
bhouston wrote: post #37

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 c…

"Neumann’s ability to negotiate such rich terms was helped by the fact that his shareholdings controlled 10 times the votes of a normal shareholder, and he was able to argue for a higher price to cede control." Correctly or, more likely, not - it seems the payoff was made in early 2021 at a time when valuations were soaring and there was a renewed push for an IPO. Neumann could have blocked that. If I'm parsing a qui…

'We paid Neumann too much to exit quickly, because we knew the company prospects were bad and we needed an IPO to exit ASAP' probably isn't a crime, assuming there weren't errors on financial disclosures.

But it's certainly dubious enough to warrant a lawsuit to see if there were false claims made.

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