Wework loses $5200/customer, lost $1.3B in H1/2019 | Hacker News Reader

2019

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72 pointsartsandsci40 comments

The pattern has been established clearly with Uber. All the investors need to get paid off, so force the IPO.

Doesn't matter if there is zero profit and no plans to make profit long or short term. Gotta have our exit! The exit is the only thing that matters anymore.

It's appalling that the IPO market has been subverted into a blatant open air scam that our government deems perfectly legal and acceptable.

It's despicable and makes me ashamed to work in tech. The whole shell game around who actually owns the shares and controls things through multiple complicated legal entities is just another huge red flag. When this all blows up the only winners will be armies of lawyers who untangle this mess.

>> It's despicable and makes me ashamed to work in tech.

Don't be ashamed! Uber has had a positive influence in the taxi industry. We finally have a decent service and we don't have to pay vip prices (it's subsidised by investors). I'm not sure if it's the case with "we work" as well because the investor might just overpay the founder's lease agreements.

But what will we be left with after the investor money has dried up?

I mean the exit game only works if there are people to buy.

Before buying there's some minimum due diligence to do

I'm not familiar with the process - what part of it is a scam? What makes tech a unique sector that makes this possible?

  what part of it is a scam?

Imagine if I had a car that was falling apart, and I sold it for much more than it was worth to some chump who didn't spot the many faults I knew it had. Maybe I put a floor mat over the rust and use thicker oil so they don't hear the rattle in the engine.

100% legal, and by some people's standards not even a scam. Caveat emptor, nothing personal it's just business.

Other people would say I was a rip-off merchant for not being upfront about the faults, and that people shouldn't do business with me until I mend my ways. I wouldn't have sold that car to a friend or family member - unless perhaps they had a car repair shop, and even then I'd point out every fault - and shouldn't an honest businessman treat every customer that way?

situational87 is the second type of person, and thinks WeWork is the IPO equivalent of a car that's falling apart.

  What makes tech a unique
  sector that makes this
  possible?

It's not unique to tech - just tech has lots of IPOs of companies that are losing money.

If it's so bad, then go short WeWork.

Some rule changes after 2008 made it impossible to short IPOs, unfortunately.

Of course they'd make that rule, those in power don't want anybody calling out their vaporware ponzi scheme IPOs and poo'ing on their party.

> made it impossible to short IPOs

This isn’t true. It’s more difficult, but not prohibited. Depending on your account size, most banks will also sell you a put or short swap bilaterally.

"The market can remain irrational longer than you can remain solvent."

Best quote ever. When it says 'you', it's literally speaking to you as the reader. Someone else will make money on the short but it will not be you. Influential insiders are the ones who have the power to decide the exact timing of when the bubble will pop and they will choose a time which maximises their profit at the expense of your principal.

The entire point of investment is to sell for more than you buy, so yes, the exit is, and always has been the only thing that matters. And your accusation that it is a scam is just not true. A scam requires deception and where is your evidence of that?

They're fraudulently exploiting a low interest rate environment by taking huge risks on behalf of other people and diverting responsibility away from themselves when things go belly up. Investors and executives take massive loans on behalf of the companies that they control, companies go out of business, investors and executives walk away with the money, creditors lose and value creators lose (because they can't compete in this unnatural zero-margin competitive environment which these fraudulent investors and executives have created).

Also, many big corporations and public companies sell their stock to 401K and Superanuation funds which hold the retirement funds of regular working people who have little control over these funds. People in many countries are forced to pay a percentage of their income into these funds which then essentially hand over the money to corporations to spend on fraudulent acquisitions.

Where is the fraud? Creditors are very aware of the interest rate environment and still chose to make the loans. Are you saying that Wework lied to creditors to obtain the loans? Because that would have to be true for it to be fraud. Investors and executives are allowed to take risks on behalf of the company because it is literally their company.

Just as one example, Wework is at least partially funded by Softbank which is a fund backed by the Saudi Public Investment fund. The Saudi Public Investment Fund is controlled by the Saudi government using regular Saudi people's retirement money, often without their explicit knowledge.

If you pick any big startup which is losing a lot of money, it will likely be backed in a large part by public money; either through a national public fund or a superannuation or 401K fund. Money which was invested on behalf of regular people was taken from their retirement accounts which they were often legally obliged to contribute a percentage of their income to. For example, even in a progressive country like Australia, people are forced to contribute 12% of their income to a superannuation fund; the process is intentionally complicated to coerce people into choosing between a small number of large funds.

It's fraud on a massive scale because the responsibility for the crime is highly divided such that any single act on its own is not a crime; they are only criminal when taken together and if you assume that everyone involved knew what they were doing.

Also, when a shell startup goes bankrupt, the biggest creditors are the banks that they took the loans from. By that point, the money which was loaned by the banks entered the financial system through executive's and investor's bank accounts (since they get huge bonuses and returns on their investments) and inflated away regular people's buying power (especially real estate markets). This inflation is felt by everyone and it's like stealing.

Another point of investment could be to buy, hold, and collect dividends without thinking about an exit.

Traditionally, many investors invested in companies because the dividend those companies paid out on their shares were enough higher than the interest the investor could get when they put their money in the bank to offset the risk of the shares losing value.

For such investors, there’s no need for share prices to go up.

I'm starting to think it's all about that unicorn emoji in their Twitter bio.

> When this all blows up the only winners will be armies of lawyers who untangle this mess.

No, it'll be the one that owns the land, whom create WeWork to raise funds to pay them exorbitant leases back to them in order to "exit" and cash out/profit before all the VCs.

Hate on WeWork all you like, but this is a shoddy article and a shoddy metric.

Their losses divided by their number of customers might equal $5,200, but that tells us roughly nothing. Maybe they have found a way to print money so they are growing aggressively?

I'd much rather meaningful metrics showing how awful WeWork actually is, than vanity metrics.

> The company plans to lost $2.7b in 2019 overall.

This article is like 5 sentences. They couldn't bother to read it twice before posting?

they outsourced that part to someone who doesn't speak English

> They lose more money per customer than any other, even world-beating-loser Uber.

Any other what? It's like a poorly written tweet of an article.

With Uber tightening it's hires, the housing market slump and this... is the bubble beginning to pop?

All we need is for one big, big event to occur.

Add to that investor pessimism driving bond yields down or inverting them, a trade war, bad global growth numbers, and investors sucking every last penny out of the stock market while there is still time. That's all you need for a downturn.

That said I'm not predicting a huge downturn. As long as there is some political correction back towards the center or left, which there usually is after a downturn, they'll be driving the Dow to 35k+ in no time. History repeats itself.

The $5200 customer is somewhat meaningless, because WeWork customers spend a lot more with WeWork than Uber or Chewy custotmers do. Would be more interesting to see as a percentage.

WeWork is a real estate investment company masquerading as a work space company. As long as real estate continues to provide big returns, I don't think Wework will ever care about losing money on customers.

Big money is investing in WeWork because its set up to swallow real estate all over the world. If you had buckets of cash and wanted to do this yourself, it would be really difficult and time consuming.

Good. We don't need businesses like WeWork, we need non-for-profit collectives and incubators

Why not? What makes this particular use case not suitable for profit?

their operations, obviously

Their mission statement.

Maybe they are making not so smart decisions with their locations? I've seen two WeWork places close to each other in the heart of London's financial district.

They could rent a huge warehouse on the edge of the city centre, but that would attract probably a different audience they aim for.

If they generate $1.3B loss with those prices[0] then how they see a way to make a profit? It's not like self driving coffee machines will save them :)

I don't get it.

[0]https://www.wework.com/buildings/5-merchant-square--london

Businesses make dumb decisions all the time, it doesn’t mean their business model isn’t suitable, in some moral sense, for profit.

Unless I am misreading the comment?

Yes I too would like not for profit incubators so I can sit in them for free, build my business/collect my six figure wage and retire with lots of profits

Just because something is nonprofit doesn't mean it's services are free.

Among other tings it means that all profits go towards furthering the organization instead of to a group of investors or shareholders.

Source: I worked at a non-profit.

Some people legit just want a place to work. They aren’t trying to join a social movement or make a statement. They want to give someone money and in exchange, someone gives them a desk.

Saying we don’t need WeWork (or other for-profit cowork places,) is like saying that hotels should close down in favor of business travelers staying on communes.

There is both room for and value from both for-profit and non-profit versions of these things.

WeWork may be billed as a for-profit company but, for all intents and purposes, it is a non-profit.

The We Company got inflated financial model.

However, the mentioned metric dollars lost per customer is a vanity metric. It does not mean much. E.g. Wework earns several times more than Uber per customer. It seems there are more upfront cost to fitout the new office vs. find a driver contractor.

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