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WeWork chases new financing as cash crunch looms

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Re: WeWork chases new financing as cash crunch looms

#81

Post by jermaustin1 »

codesushi42 wrote: post #48
cgh wrote: post #24

I don’t understand how this company employed 1500+ programmers, PMs and data science people. What did they do? I guess not much, as 500 of them got laid off recently.

I am even more baffled that 1500 engineers accepted an offer at a company that's clearly a fraud. And it would have taken one Google search about their prospective employer to have seen this. If you work at or did work at We, what was your reasoning? Did you have any?

I'm sure they worked for a paycheck, providing the critical infrastructure needed to property manage that many office spaces and customers.

WeWork has tens of thousands of customers who for the most part are able to seamlessly come and go, check out conference rooms, pay for various one-offs, and their membership fees.

Did they need 1500 engineers to build all of that, no. But when you take venture capital in the expectation of growth, you have to grow.

Re: WeWork chases new financing as cash crunch looms

#83

Post by bdcravens »

codesushi42 wrote: post #75
bdcravens wrote: post #70

Earlier quoted context omitted.

I don’t think it was as obvious as it is now. Plus a lot of engineers work at companies which are blatant VC plays with little chance of viability, outside of acquisition. Those companies just don’t burn as hot or as fast as WeWork.

Even so, surely the revenue numbers were shared internally at some point. After which, anyone who could would have run for the hills.

Unless you're stuck in a job where you're below market in exchange for equity, as long as the checks keep clearing, you're not really incentivized to run for the hills. Keep your resume fresh, sure. Though we can make presumptions about what having WW on your resume will do reputation-wise, it sounds like it was a good opportunity to also fill it with a ton of buzz words.

Re: WeWork chases new financing as cash crunch looms

#84

Post by fennecfoxen »

markstos wrote: post #42
mchristen wrote: post #35

Earlier quoted context omitted.

This seems to be a common practice. My parents live in a highrise that has construction defects and it took years to extract money to repair the building because the LLC that sold the building to the condo association had no cash or assets anymore.

My accountant advised our business to setup a separate business to own the building we wanted to buy. It silos the liabilities of each. Also, you have some flexibility in how much you charge yourself for rent. Depending on which company might owe more taxes, you may want to adjust that rate up and down. In our case, the property business outlived the primary business turned out to be another benefit of decoupling the…

It also means that if you have a building, and you put a sofa in the lobby, and carpets, and energy efficient light bulbs, and a pressure washer in the utility closet, and you hire someone to do security and maintenance (or contract it out to a third party service), and you set up some deal with Amazon to put lockers in the lobby — then you can sell all that stuff just by selling the LLC, and maintain all the contracts as you wish. Or, you can sell 10% stakes in the LLC to 8 different investors (keeping 20% for yourself), and not worry about eight 10% stakes in the building's pressure-washer.

Corporations are basically containerization technology for ownership, and "a building" is a decent place to set a container boundary.

Re: WeWork chases new financing as cash crunch looms

#85

Post by mlthoughts2018 »

raiyu wrote: post #54

This could be the best situation for Softbank. WeWork is obviously in desparate need of cash, no one is going to touch it with a ten foot pole. Softbank is too invested for it to fail. They can buy up 50% of the equity remaining for any sort of investment since they will have a gun to their head the company will have to accept or go bankrupt. Adam Neumann's shares will become worthless in the process and new shares w…

I think this assumes there’s some inner core of WeWork that is worth saving. I mean, maybe Softbank will fall for a sunk cost fallacy and pursue it irrationally, but I don’t see why that would be useful instead of just founding a different company to do that small kernel of an idea at much lower scale.

It’s actually a big if to me whether there even is a kernel of a business idea. Even if there is, can it (assuming massive rehabilitation) generate profits of a sufficient level for Softbank to care?

Re: WeWork chases new financing as cash crunch looms

#86

Post by heavenlyblue »

Cd00d wrote: post #63
markstos wrote: post #42

Earlier quoted context omitted.

My accountant advised our business to setup a separate business to own the building we wanted to buy. It silos the liabilities of each. Also, you have some flexibility in how much you charge yourself for rent. Depending on which company might owe more taxes, you may want to adjust that rate up and down. In our case, the property business outlived the primary business turned out to be another benefit of decoupling the…

Liabilities makes sense. I used to be at a remote sensing company that was leasing a plane and when we were close to buying instead the CFO said, we need to start a new company for the liabilities.

To be fair (not blaming you here), but this seems incredibly dodgy.

This is essentially the monopolisation of the market on multiple fronts without any of the consequences to you as a business.

For example, you are taking away business from renters who could be making money on rent but also spending that money keeping the buildings safe.

Not as sure this should be legal, let’s say.

Re: WeWork chases new financing as cash crunch looms

#87

Post by unaxk38 »

atdrummond wrote: post #56
raiyu wrote: post #54

This could be the best situation for Softbank. WeWork is obviously in desparate need of cash, no one is going to touch it with a ten foot pole. Softbank is too invested for it to fail. They can buy up 50% of the equity remaining for any sort of investment since they will have a gun to their head the company will have to accept or go bankrupt. Adam Neumann's shares will become worthless in the process and new shares w…

He already ferreted away $700m. He'll be fine.

That number is so misleading. I wish the media/prof Galloway would stop referencing it.

The $700M number is a mix of a $300M secondary sale to SoftBank and a $400M loan to purchase stock options.

We don't know enough to say how far ahead (or behind) he is. He likely exercised his stock options at a highly inflated value, which means his AMT bill must be huge. Not only that, he is sitting on stock that is rapidly diminishing in value, and there's a non-zero chance it could be worth 0.

So he has maybe $150M cash after the $300M sale + ??? value of stock from exercising $400M in options.

And his liability is his capital gains bill from the $300M sale + the $400M loan to pay back + AMT bill from the exercise of stock options.

Re: WeWork chases new financing as cash crunch looms

#88

Post by MuffinFlavored »

unaxk38 wrote: post #87
atdrummond wrote: post #56

Earlier quoted context omitted.

He already ferreted away $700m. He'll be fine.

That number is so misleading. I wish the media/prof Galloway would stop referencing it. The $700M number is a mix of a $300M secondary sale to SoftBank and a $400M loan to purchase stock options. We don't know enough to say how far ahead (or behind) he is. He likely exercised his stock options at a highly inflated value, which means his AMT bill must be huge. Not only that, he is sitting on stock that is rapidly dimi…

> he has maybe $150M cash

$150m is enough to be fine too :)

Re: WeWork chases new financing as cash crunch looms

#89

Post by unaxk38 »

MuffinFlavored wrote: post #88
unaxk38 wrote: post #87

Earlier quoted context omitted.

That number is so misleading. I wish the media/prof Galloway would stop referencing it. The $700M number is a mix of a $300M secondary sale to SoftBank and a $400M loan to purchase stock options. We don't know enough to say how far ahead (or behind) he is. He likely exercised his stock options at a highly inflated value, which means his AMT bill must be huge. Not only that, he is sitting on stock that is rapidly dimi…

> he has maybe $150M cash $150m is enough to be fine too :)

His worth is assets - liabilities. I'm saying his liabilities look huge, much more than $150M.

Re: WeWork chases new financing as cash crunch looms

#90

Post by paulsutter »

unaxk38 wrote: post #87
atdrummond wrote: post #56

Earlier quoted context omitted.

He already ferreted away $700m. He'll be fine.

That number is so misleading. I wish the media/prof Galloway would stop referencing it. The $700M number is a mix of a $300M secondary sale to SoftBank and a $400M loan to purchase stock options. We don't know enough to say how far ahead (or behind) he is. He likely exercised his stock options at a highly inflated value, which means his AMT bill must be huge. Not only that, he is sitting on stock that is rapidly dimi…

He surely owns his stock outright, not as options, since he founded the company.
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