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Some WeWork Board Members Seek to Remove Adam Neumann as CEO

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Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#91

Post by the_watcher »

bhouston wrote: post #45
tempsy wrote: post #43

Earlier quoted context omitted.

Nah, this isn't like Theranos. In reality, it is a very good product with slim margins. The reason it is losing so much money is because it is expanding quickly to show that it is a "high growth" Unicorn company. It isn't that it's a scam, it just puts it is a non-tech/non-SaaS category. Every founder/CEO wants to tell a huge growth story. If private investors are buying that then it's just that they miscalculated, b…

Slim margins means it isn't a great product, at least by standard business definitions. A product with slim margins is one that you divest from so you can focus on the products with good margins.

There are lots of good businesses that operate on thin margins. They're good businesses, which is why you can divest them to investors who want to run a good business. What they're not are businesses that should trade at anything close to software revenue multiples.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#92

Post by rossdavidh »

thedogeye wrote: post #53

WeWork is a useful product. Office real estate is broken for startups. Landlords make us take 5-10 year leases when startup planning horizons are almost never longer than 18 months. WeWork earning 30-40% margins by allowing us to take shorter terms that better fit our needs. Should be a good business.

I actually agree, but I don't see any reason why they should be a $40B company. Forbes or Bloomberg or someone compared them to other companies in the space, and valued them at $4B or so. That is still a great opportunity...unless you have invested $10B to get there.

It's not that there is no need for what WeWork does; it's that they do it too expensively, and are valuing themselves far too high.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#93

Post by smelendez »

GCA10 wrote: post #42

Leaving aside all of the headline-making entertainment of Adam Neumann being Adam, the real problem here is that WeWork really doesn't have much in the way of enduring network-effect advantages -- even though it tried so hard to convince investors otherwise. In many tech-fueled marketplaces, getting big in a hurry is a practically unbeatable advantage. I saw this 20 years ago when I was tracking eBay. No end of littl…

I think it's possible there could be advantages for a chain co-working space over independent ones, but it depends on how the market looks long term. Not saying that chain has to be WeWork, of course.

For instance, short term users, who pay the highest rates, could turn out to be a big part of the market. That could be business travelers, companies moving office or setting up offices, companies that need temp office work, etc. They may go for a well-known chain over an independent, just like business travelers often do with hotels. Similar with, as you mentioned, big companies that need to hire in a lot of different cities at once.

It's also possible a big chain could manage to offer better deals than a smaller player if they can negotiate with big, multicity landlords and other vendors or get some kind of special deals for members (e.g., discounts on software, or cheap lunch delivery/taxi service sharing drivers between members).

We also owns Meetup, and I could see WeWork or another chain finding ways to offer additional uses that we don't currently associate with coworking spaces. The advantage could be easy online booking for all kinds of meetings and events, maybe with added features like food and beverage catering.

A chain could also effectively become a marketplace for coworking and other temporary business space needs. Maybe you could book a spot for your company holiday party, or reserve a shopping mall kiosk for a week to do user testing, or even book space at a non-corporate-owned coworking space through your account.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#94

Post by jeremyjh »

ink_13 wrote: post #20
jeremyjh wrote: post #17

> Mr. Neumann still has allies among the directors and the ability to fire the entire board thanks to shares he controls that carry extra votes. It defies imagination that a fund would put 10B into a company whose CEO is accountable to no one. I think we may also see new leadership in SoftBank, or at least their next fund.

This is true of many large companies today, though. Facebook comes to mind.

No one put anything close to 10B into Facebook. Their largest single investor was Goldman Sachs at 450MM, after there was already a lot of other money in. Their total funding was 2.3B before IPO.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#95

Post by sremani »

thedogeye wrote: post #53

WeWork is a useful product. Office real estate is broken for startups. Landlords make us take 5-10 year leases when startup planning horizons are almost never longer than 18 months. WeWork earning 30-40% margins by allowing us to take shorter terms that better fit our needs. Should be a good business.

Prof.Damodharan has an excellent valuation on WeWork. The bottomline is WeWork as an $8 Billion company would be appropriate valuation.

Yes, WeWork has market-fit, no one denies that. Their problem is governance and risk management. On top of it, how would an unprofitable company with massive debt and contract obligations do during a down-turn.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#96

Post by tempsy »

smacktoward wrote: post #75
tempsy wrote: post #47

Earlier quoted context omitted.

I was referring to the quality of the product from the customer POV.

From the customer's POV, selling dollar bills for fifty cents each is also a high-quality product.

No not really. Again, they lose billions right now because it costs a lot to build out new buildings. Then as a building matures they recoup these costs through the memberships. The more mature offices are profitable. It just isn’t necessarily tech/VC level profits.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#97

Post by BubRoss »

tptacek wrote: post #51
tempsy wrote: post #26

Didn't investors, especially SoftBank, enable this behavior? They deserve as much blame for this mess as he does, if not more.

Help me understand how this is a coherent argument. I could see making the argument that investors share some of the blame for what the CEO did. How could they have more of the blame?

He said for 'this mess', not for what the CEO did.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#98

Post by JumpCrisscross »

Donald wrote: post #35
jeremyjh wrote: post #17

> Mr. Neumann still has allies among the directors and the ability to fire the entire board thanks to shares he controls that carry extra votes. It defies imagination that a fund would put 10B into a company whose CEO is accountable to no one. I think we may also see new leadership in SoftBank, or at least their next fund.

You can thank loose monetary policy that has created an unbalance between capital seeking returns and the number of investment opportunities. Executives have leveraged this into abusive multi-class share structures that sacrifice shareholder's ability to reign in company behavior. The result is a few tech executives wielding unaccountable authority over incredibly powerful economic resources.

> You can thank loose monetary policy

I'm not so sure. WeWork is the product of three capital sources.

One, Mortimer Zuckerman, who was "not just their landlords AND seed investor," but also "happened to own Fast Company and NY Post which were instrumental in propping up WeWork in the press before anybody knew who they were" [1].

Two, MBS, who backed the Vision Fund to the tune of $45 billion [2].

Three, Masa Son.

Mr. Zuckerman's investment was too small to be affected by monetary policy. And I doubt the Saudis invested in the Vision Fund because their bonds weren't yielding enough. The only monetary actor is Son, though that is more based on Japan than dollar dynamics.

WeWork's competition, on the other hand, is juiced by monetary policy in the form of construction loan and mortgage rates. But that doesn't create WeWork, just lots of commercial real estate.

[1] https://medium.com/@henry.hawksberry/is-we-work-a-fraud-5b78...

[2] https://www.reuters.com/article/us-saudi-pif-investment-fact...

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#99

Post by daniel-cussen »

ucha wrote: post #73
the_watcher wrote: post #39

Earlier quoted context omitted.

It's true of some large companies, yes. But it's still extraordinarily uncommon overall. Zuck's Facebook arrangement was essentially unique at the time of the IPO, and Facebook's success led to more founders on unicorn trajectory demanding and receiving similar terms, but it's still far from the norm.

Google has 3 share classes as well and the founders control more than 50% of the voting power.

Yes, but there's two of them.

Re: Some WeWork Board Members Seek to Remove Adam Neumann as CEO

#100

Post by hbbio »

thedogeye wrote: post #53

WeWork is a useful product. Office real estate is broken for startups. Landlords make us take 5-10 year leases when startup planning horizons are almost never longer than 18 months. WeWork earning 30-40% margins by allowing us to take shorter terms that better fit our needs. Should be a good business.

There is clearly a market for WeWork... and many competitors. WeWork is and will be a great company, no matter what.

WeWork main competitor is Regus, founded in 1989. Regus is now present worldwide with revenues of 2.535 billion GBP (2018). Their market cap is a mere 3.68 billion!

There are also tons of smaller companies in that sector which are not international (mostly 1/2 countries) with much lower valuations.

So, the business model is fine, the market fine, the room to expansion here (especially with growth of remote work). Just the previous valuation wasn't.

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