Troubles Mount for the We Company as Softbank Reportedly Calls for Shelving IPO
techcrunch.com
techcrunch.com
You want sustained hockey stick growth, regardless of the cost to the team and the business, no matter what? Then you’re gonna find some founders that are much better at making the business look promising by hitting certain metrics than actually building a solid operational foundation for the business.
I'm blanking on the tech company [1] that recently gave into the pro-traditional corp gov people and gave up their super-voting shares, only for Wall St. to start screwing them and the long-term of the company, which was reported as a blow for the pro-trad corp gov people.
It's a hard call, but I think I'm still for close control by the founders. Sure Elon might've promised too much and pushed Tesla too far, but if they put in a former auto exec I suspect the company wouldn't be as far along as it is.
The SolarCity acquisition OTOH seems like Elon taking a bonus for himself and having the power (via his votes, but also who he is for the company / execution) to make the board go along with it.
I suspect Neumann's investors are in too deep to challenge his craziness (sound like anyone else?) but the market rightly smells bullshit.
[1] I heard about it on Pro Rata the other day.
Of course.
Yes you have the occasional bad apple, but so what? You're a VC...you have 10 bad apples for every 1 good one.
The calculus is in favor of pouring gas on a promising bet, even if it increases the risk of explosion.
Its seems like it was a 1 off payment of 'only' $5.9 million
https://www.businessinsider.com/wework-ceo-gives-back-millio...
All that being said, someone needs to be mentoring the CEO, like right now. That S1 was... not... great.
An IPO at $20bn, that may tank afterwards, would really hurt their paper profits.
The wheels come off when anyone else gets to value the investment. That’s happening now. I wonder how other SoftBank businesses like ARM will be impacted.
I don't think many investors dispute the ~$28b valuation that Softbank paid for ARM.
I'd love to know how throwing good money after bad would shore up the faith in the rest of the portfolio?
"No one else wants this, but we can't afford to mark-to-market, so we're going to throw more money in with the hopes of maintaining an illusory valuation."
At the end of the day, it's a bad business. Can't fake your way out of it.
I mean, I'm just throwing something out there - I can't see how they were funded in the first place...
But, there's definitely a scenario where We taking a 50% haircut after several large-scale late rounds led by one prominent fund could lead to other companies valued at a level by the same late stage fund being valued less. The optics of that to other investors, whilst common for a lot of funds, at this late stage could raise some eyebrows.
$3bn to maintain We's valuation on the private market might mitigate against several multi-$bn write downs across the portfolio, especially if they're planning IPOs as well.
No idea if it's a decent strategy, but this is VC we're talking about...
That's a hell of a big bet. It's not hard to imagine Softbank will do whatever it can, rational or not, to try to get WeWork to a point where they can cash out.
I agree: they'll do something. But having to pour money into a company that just blew its IPO because the business is terrible...well, not sure the market as a whole can see that as anything else but "we're f-cked!"
I jest, but WeWork is one of those strange entities that's greater than the sum of its parts. If the magic goes or the brand tarnishes a little, then the whole thing goes poof.
Because there is just too much dumb money floating around and waiting to be invested after a decade of QE monetary policy. But instead of governments (worldwide) using said dumb money to invest in their future e.g. by building (or even maintaining!) infrastructure, teaching young students, fixing up environmental issues or helping people rebuild their savings/retirement, the money is forced into such "investments".
Next recession is gonna hit hard.
The issue is not with what they are selling it’s with how they are funding it. I think this story says a lot less about We than it does about SoftBank.
Also, I'd call one vendor in a space a monopoly. Rareness is about the ease of finding a vendor.
There were online retailers before Amazon, too.
Depends on the market. Regus, as far as I know, doesn't put a lot of effort on build-out of the spaces they sublet. They take them pretty much as they are. It certainly wasn't a co-working space, but those weren't rare before WeWork either.
> There were online retailers before Amazon, too.
There certainly were online retailers before Amazon, but people didn't call them "rare" before Amazon.
I see WeWork has having a few damning problems that aren't issues of questionable business or accounting practices:
1) Since they're an challenger in a hot real-estate market, they're starting at a price disadvantage to anyone who already has properties. If other brands can copy enough of their magic at 20% less money, watch WeWork disappear from approved-vendor lists.
2) They're pushing for scale in a non-scale business. There's not huge synergies in supply, marketing, or purchasing. The fact they have hundreds of locations doesn't matter for many "I need an office in one specific place" use case. I don't doubt a WeWork of a handful of locations, as a niche product, would be a modest success. But they need that investor-pleasing hockey-stick growth which means "open 500 locations speculatively" and "generate huge debts and close 50% of locations once we figure out what won't perform".
Or it's one of those entities that claimed to be greater than the sum of it's parts often enough that people started to believe.
Uber as well, although it actually has a solid brand and a useful product. However, the fund is underwater on their investment too, which adds pressure.
Brandless even fired their CEO back in March of this year.
Wag founds are off doing a mobility startup, got kicked out as well.
Another way of looking at it, anyway. I have no insight one way or the other.
But the fact that Softbank can't walk away from We seems to indicate that they actually are a lot more sensitive to the market than they claim to be. It really changes the dynamic if Softbank can't afford to hold all these companies when the next recession comes. You don't want to be a Softbank owned company during that fire sale.
https://www.zerohedge.com/news/2019-09-09/2-letters-20-billi...
> Super-voting stock – Zuck did that and it worked out in the end
> Accelerating losses – Look at all that revenue growth
> Zero possibility of profits – Hasn’t mattered for years
> Convoluted insider dealings on property leases – Property GPs always double dip somehow
> Sold the pronoun “WE” to the company – That man is a crook!!
ZH's formulaic way of writing sensational bearish pieces gets a little tiresome after you notice it (posted submitted by guest readers like this one don't follow this format):
Intro about main point
Background on main point
Quote from the source about the main point, repeating the background section but in italics
Controversial next point, with a bolded section
Quote from the source about the controversial next point, repeating the exact prior section, but in italics
Tweets
Two line conclusion, with a finance pun.
I try to just read Bloomberg or Wall Street Journal directly. But Zerohedge's decade long bear market porn is so entertaining.
They used to have credit market specialists writing, but it seems they don't stick around for long.
Not that anything like that ever had major problems
But on the topic, ZH is good some 20% of the time, the other 80% is just packaged talking points on "long big recession" (I mean that's actually the motto they follow), EUphobia and some amount of Russianphilia
[1]https://www.zerohedge.com/news/2019-09-05/5-surprising-scien...
"While most of the current climatologists who collaborate with the United Nations believe anthropogenic CO2 emissions have exacerbated natural warming in recent decades, there is no empirical proof to support their claim. The only way to test it would be to wait and see if their assumptions come true.
The entire climate fraternity was in for a surprise when global temperature between 2000 and 2016 failed to rise as anticipated by the climate alarmists. The scientists assumed that rising CO2 emissions from human activity would result in a rapid rise in temperature, but they didn’t.
This proved that atmospheric CO2 concentrations are not the primary factor controlling global temperature. Consideration of a much longer period (10,000 or more years) suggests that CO2 had no significant role to play in temperature increases. CO2 never was the temperature control knob."
It is in aggregate an extreme blog with narratives that are non-consensus. So, yes, climate denial fits in that box, but it will also have articles on climate apocalypse. In aggregate I find it to be fairly eye-opening and bring to light ideas that are forgotten by mainstream media. It also has a healthy disregard for any form of consensus reality or authority.
Furthermore, in the very article you linked there is a link to a NATURE commentary: https://www.nature.com/articles/nclimate2938.epdf
Of course, we should leave it to experts to interpret a scientific paper such as this one, but my perception is that reporters do not always get it right. In all of the NYTimes you just hear the consensus from organizations such as the UN, I have yet to see an interview with an author of a paper such as the one mentioned above.
------
I didn't link the article, I just reply to the comment asking what was wrong. But he's very much wrong and that nature article doesn't support him. He said CO2 did not lead to a rise in temperature. That article says there was a lower than expected rise in temperature - it's still rose!
He said co2 has no significant impact on temperature which is definitely not what that paper is saying. They refer to co2 as anthropogenic forcing.
Full text is here: http://www.meteo.psu.edu/holocene/public_html/Mann/articles/...
Give equal time to both sides, even when one side is blatantly full of shit. It's ridiculous.
And that CO2 not being “proven” as the primary motivator due to lack of testing is also trivially true — we only have the one earth to test on, so we test on models; and our understanding of earth is hardly complete, and so too must be our model.
The conclusions may be “wrong” but at least that article is hardly making things up as they go along
https://cornwallalliance.org/2012/12/carbon-dioxide-and-air-...
That doesn't make him wrong, but it does raise questions. There are also few who agree with his stance.
https://www.usatoday.com/story/news/2015/02/26/uds-david-leg...
Fully examining arguments against Legates would be a lot of work, but here's a discussion of his most recent paper.
https://www.theguardian.com/environment/climate-consensus-97...
https://www.theguardian.com/environment/climate-consensus-97...
Every commentator/speculator was drooling at the possibility of "boring" Yahoo going bust, despite Yahoo being the most sound business in the dotcom space, and ignoring walking warning signs like Pets.com.
Lets base it on reports of a couple of big name species and declare everything is fine. Facts!
if you read zerohedge you have long since decided that facts do not at all matter to you.
Take the point that climates have always changed. Most definitely. However the concern has always been the rate at which warming is occurring. Given that humans and agriculture have fragmented the natural habitat and hence the ranges of species, the primary concern is the ability of species to adapt. I know that's too subtle a point for mainstream media to digest but it's pretty fundamental in describing the problem. For example, if you are a Brown Bear in northern Spain or the Pyrenees there's nowhere to go.
You could do the same for the other points. All verifiable. It's only once you start adding the consequences that things start to look a little problematic.
In the end it matters little if the planet is warming from natural or man-made causes. If the environment is sufficiently degraded that things start to come apart then everything is in trouble.
They shilled hard for Putin/Russia. The articles/comment section was a propaganda piece for the Kremlin. It forced a lot of good people with something interesting to say, to leave.
Ouch. :)
Also forfeiture doesn't account for the fact that you may have paid capital gains tax. I feel like they really shafted me on that one.
I was sentenced in March of 2018 and self-surrendered at FCI Morgantown on May of 2018. I participated in the residential program and left in May of 2019. I am fully released in October of 2019. I currently live at the halfway house. You need an ankle monitor to go on home confinement and my place of employment is not compatible with an ankle monitor. Unfortunately, the BOP requires you to pay 25% of your gross income to the halfway house while you reside there.
Edit: I can't edit my original comment. I'd also like to add that Matt Levine's wife works at the Federal Defenders of NY office.
Alice says to you, right up front, “I need to make one billion dollars, or I look for a different partner.”
Are you going to accuse Alice of being greedy, when your entire business consists of making money? You don’t cure the sick, or bring the Internet to rural communities, or manufacture safe transportation, or serve healthy food. You just make money.
So you say, “Fine, Alice, but a billion dollars is a lot of money.” Alice says, “How much do you need to make, such that my dream can come true?”
So you work out how you can make ten billion, while Alice makes one billion.
Now the conversation becomes, “How does Alice take her one billion out of the business, tweaking the knobs for risk, tax advantage, estate planning, and so forth?”
You bought into Alice making a billion dollars, so everything else is just details about when she gets the various bits of her billion.
But its purpose is NOT to police self-dealing. And the people putting the money in are exactly the people who are directly responsible for governance.
Likewise, due to regulatory capture, the people who put money into businesses are closely related to the people who write laws about what is or isn’t legal, and enforce those laws.
So if Adam’s choices are ok with his investors, they are going to be structured in such a way that they are perfectly legal.
The bottom line:
If Adam provides an opportunity for his investors to make their “ten billion,” why would anyone object to his self-dealing?
Why do we, for that matter?
What crime is being committed, if everything is disclosed? What puritanical streak runs through us that we object to his leasing his own buildings back to his business on moral grounds?
Either he follows through and makes his investors rich, or he doesn’t. I have opinions about that, but at the end of the day, that is all that matters to his financiers, which is why he so-called “got away with it.”
And the things that were unwound were only unwound because they impacted the likelihood of his investors making money. It had nothing to do with crimes being committed or moral turpitude.
What you mistake for loathing is actually me putting money in black and white. Money is neutral. It’s not good, it’s not evil. What people do or don’t do to make it is good or evil. What people do with it is good or evil.
Leasing your trademarks to an entity you own? That’s just shuffling money around. It’s not evil and not a crime. It may affect somebody’s calculations about whether they want to buy a stock, but that’s exactly what the S-1 is for.
On the other hand, why would anyone care whether or not his investors make their “ten billion”?
We object because it’s a you-scratch-our-back-we-scratch-yours situation in which the rich get richer and no value is produced for the rest of society.
But my parent comment was responding to the question of whether this specific behaviour is illegal. Your take touches on whether the entire industry—with or without a few leasebacks and trademark deals—is morally repugnant.
Does it?
There’s one aspect of some sort of ethical wrongness because I suspect there’s an eventual chump who will lose out not having full perspective when this thing falls apart.
But, for me, I have a tendency to feel uncomfortable when things are “obviously” wrong. I find it curious about me, and I’ve met others, who just don’t like it when things are off. The simple act of making the world more correct is pleasing. I’ve found it pretty helpful in debugging and system design. I find it really annoying in domains where there isn’t really an objective right and wrong, or it’s not clear to me what’s right, or where they aren’t fixable. And it’s pretty common in politics or religion where people point out wrongs.
So I don’t think money or technology is neutral. I think they both as information have certain innate needs to grow in the most efficient way possible. Money is like a river trying to flow to the ocean and actions like We took and is taking are the equivalent of trying to build a harbor in shallow water or some other illogical act.
And I think it's valid to use that to make predictions about the company's viability and/or make predictions about the likely outcome of any private or public stock market investment.
Choosing whether to do business with someone who fully discloses their past choices and is truthful about their future plans is a whole different thing from judging whether their past choices are criminal and/or dishonest.
Unless it is revealed that they are withholding other relevant transactions, I'd say the man is honest. But "honest" is not synonymous with, "someone I want to do business with."
...but it's hard to care.
(i.e. the 'great' thing about this is that it makes being the founder completely risk-free, you make millions even if your firm craters)
Maybe we should just not have anyone worth a billion dollars.
Probably. Investors were amply aware of Adam’s self dealing. It was abundantly disclosed, and they accepted it as part of their investment.
Their wager was the self dealing was a fair cost to pay for WeWork’s growth. They didn’t count on public equity investors being a savvy bunch.
There will almost certainly be lawsuits, but the only moves that look like they crossed clear lines one can’t disclose oneself out of were those involving his hiring his family members. But again, probably a civil dispute by someone turned down for a promotion or similar job.
https://www.zerohedge.com/news/2016-08-06/atom-bomb-annivers...
"The attacks on Hiroshima and Nagasaki were horrible and tragic. But whether they were results of “atom” bombs (certainly in the sense that people understand them today) is at least seriously questionable."
>We’ve reported that a squadron of 66 bombers were launched on August 6th (666) to bomb the municipality of Imabari, even though Imabari. had been bombed already, twice.
>This bombing squadron may well have fire-bombed Hiroshima instead, as Hiroshima was not far away.
According to early surviving versions of Revelations, the number of the beast is actually 616 - https://web.archive.org/web/20080110172555/http://news.natio... - however this revelation doesn't appear to have filtered through to the conspiratoraly minded as of yet.
Unless they meant that the number of the beast is Nero's name when you attempt to write it in Greek, though that seems something of a stretch, even for numerology afficionados.
> It only is when the words are transliterated from Greek into Hebrew and then calculated that the numeration adds up to 666 (nrwn qsr, 50 + 200 + 6 + 50 + 100 + 60 + 200). Even so, this is an alternate spelling, a letter being transliterated in "Neron" (nrwn instead of nrw) but not in "Caesar" (qsr instead of qysr)
> If the Latin (rather than the Greek) spelling "Nero Caesar" is transliterated into Hebrew (nrw qsr), the final "n" in Neron being omitted (and its corresponding value of 50), the name computes as 616, which is the number indicated in the oldest surviving copy of the New Testament
http://penelope.uchicago.edu/~grout/encyclopaedia_romana/gla...