‘We were sold off’: WeWork’s staff face uncertain future as company collapses
theguardian.com
theguardian.com
So Softbank needs funding to buy out the controlling stake in WeWork. They're reaching out to Japan's largest bank, Mitsubishi UFJ, for that $9.5B. As of last night, MUFJ refused to lend money to Softbank if they intend on using it as a rescue package for WeWork.
Now Softbank is in a conundrum. This morning, I read that they're trying to figure out a way to slash Neuman's golden parachute from that $1.7B figure.
Schadenfreude is sweet sometimes.
SoftBank Seeks $2.8 Billion in Financing From Japan Banks[2]
SoftBank wants to reduce WeWork rescue package[3]
SoftBank Execs Discuss Trimming WeWork Offer and Adam Neumann Payout [4]
[1] https://www.ft.com/content/d69e84c0-0c1b-11ea-bb52-34c8d9dc6...
[2] https://www.bloomberg.com/news/articles/2019-11-21/softbank-...
[3] https://therealdeal.com/2019/11/22/softbank-wants-to-reduce-...
[4] https://www.bloomberg.com/news/articles/2019-11-21/softbank-...
The running joke in my dept is they're going to start cutting back on amenities (watered down mouthwash, less cut up fruit in the fruitwater, etc.) and we won't see as many maintenance people as we did six months ago.
The private phone booths are still boarded up because of the formaldehyde issue (our booths weren't "affected" but they're still closed off). There was a meeting room with a couch that had bedbugs in it, so that was closed off for a couple weeks. We refuse to use that meeting room now.
WeWork has just had its problem after problem in my time working here. We're not exactly scared (because we're a larger company and could probably just telecommute while our office is moved to another building). But we have noticed that the WeWork associates have become less chipper over time.
while I find this story interesting to see how things play out, what lessons learned, etc, I don't revel at all about what is happening even though it has no direct impact on me. I feel bad for those 2.5k+ employees that went from 'our company is going to go public and this is going to pay off nicely to me' to "I got nothing and now I'm being laid off". Its sad, sorry that happened to them.
The wework debacle is already having negative ramifications in tech where companies are over correcting from earnings growth and investment to higher bottom lines. This will also lead to lower pay and opportunity for many tech workers. I'm not reveling.
I don't revel about the 2.5k employees that lose their jobs at all. (Not that I befriended many of the WeWork employees, but they're very nice people and I would hate to be in their situation, especially this close to the holidays.)
I revel about the irrational exuberance from the upper echelons of management/banking. I revel that Neuman, Softbank, JPM, Goldman Sachs, etc. are now getting called out for trying to dress up a pig in lipstick and sell it to the public at 10x its current (perhaps, "real"?) valuation.
Your last paragraph though - it's hard to make the determination that "WeWork's meltdown is leading to corrections in earnings growth/investment from tech companies." Not necessarily true imo, earnings growth was bound to correct sometime soon, especially with economic data pointing that demand is starting to slow (which is why central banks across the world are easing rates).
Couldn't agree with this any more. If anything, the best thing to come out of the WeWork debacle is more founders will be aware banks pump the stocks up so the bankers get rich when a firm IPOs but then generally deflates after the hype dies down and before tech workers can benefit.
At this point, I think WeWork is over no matter what. The only question is how long the death throes will last.
Many cleaning workers are actually unionized, the SEIU is a large union of service workers with contracts for hospitals, large office complexes, prisons, schools, etc.
History doesn't repeat itself, but it rhymes. I wish I could have hope that this wouldn't happen again in the future (banks selling an overvalued business to the public markets via IPO) But really, this has happened before and it will happen again. Human irrationality knows no bounds.
I suspect the only way that would maybe go away would be both greater transparency requirements and the ability for the market to parse all of the data in an informed way. So in other words technically possible but probably not going to happen.
Until the next bubble, at least.
Neumann, by taking money from SoftBank, was completely complicit. He knew his financials, he knew the company was a flaming dumpster, he knew he had no plan to fix it, other than buying a wave pool company and assigning his family to high-level positions.
You really think if the company had gone public, Neumann would have what, stepped up and said "see, this is why we need to add more investor protections"?
There are plenty of private companies with outside capital that are not structured for a stock market debut. WeWork was one of them and the investors tried to list it on the stock markets anyway.
Neumann played the best cards available to him and cemented his consolidated ownership, with a different share class becoming a mere conduit for payment, and voter control allowing for unilateral signing off on contracts to himself and his other entities.
Sure, the people who chose to work for WeWork now have worthless equity, but that's always a risk when working for a startup, and they knew that going in.
imo this is always one of the first tells that company owners aren't good to be in business with. I've never had a good experience with family-run businesses in my entire career- have learned to completely avoid them at this point.
That values WeWork somewhere between -15.2B and 1.8B based on their 2018 performance data.
Measured against their competitors, they're still about 5X over-valued.
WeWork was way overvalued because they sold themselves to the public as a "tech company" that dabbled in real estate, not a real estate company that dabbled in tech. I mean, they had a lot of the same characteristics (such as crazy revenue growth while operating at a loss), but let's be clear: WeWork isn't a tech company, they're a real estate company in "tech clothes."
To circle this back to the parent comment - I still don't think they'll be profitable after drastically cutting spending. They might be able to keep the company afloat for a little bit. But their spending cuts target parts of the business that aren't under their "core competency" which is leasing office space on a short-term basis. So for example, they ax'd plans for WeLive or WeSchool (or whatever their kindergarten plans were called) as part of their turnaround plan.
WeWork has something like $17B in long-term lease liabilities across major cities in the US (and UK, I believe). They signed these long-term (10+ years I believe) leases with hopes of turning around and leasing them back to freelancers/businesses on a short-term (3-6mo) basis. If the economy slows down and demand for this variable-term space dries up, WeWork will still be on the hook for those $17B leases.
And yet - as bad as their "losses" were - precisely none of those people are actually suffer (in actual personal, physical terms) anywhere near as badly as the laid off / outsourced service workers referred to in the article.
That is gluttonous. To put that into perspective, if you took even just $100m and divided it among the 1,000 workers laid off each one would get $100,000.
Yet they get nothing. And this one man gets $1.7bn from a company that isn't even healthy enough to survive while nickle and diming janitors who get paid $24k/year.
This is what late stage capitalism looks like.
As far as the employees go, anyone working for a company clearly not making any money needs to move along. Whatever consequences you suffer are at your own risk.
And as far as what this might look like under socialism, the government would take money from people who have nothing to do with any of it and give it to all of the people involved in order to maintain an organization that nobody wants to do business with.
“Late stage capitalism” and “socialism” is a false dilemma. We can see the known, evil effects of late-stage capitalism, and it is appropriate to pin the blame on the systems which encourage this behavior even while acknowledging the benefits of those systems and while holding accountable actors within these systems.
"Sombart, at that time, was an important Marxian, someone who used and interpreted Karl Marx — to the point that Friedrich Engels said he was the only German professor who understood Das Kapital. Sombart called himself a "convinced Marxist,"[1] but later wrote that "It had to be admitted in the end that Marx had made mistakes on many points of importance."
Who are we to judge what price you put on things and what you are willing to pay?
no one is being forced to do anything here
I don’t see how anyone else’s net worth is at play here
Edit: ah, here they are to come downvote me
https://news.ycombinator.com/newsguidelines.html
(Regardless of my agreement or disagreement with your points otherwise.)
I don't think any private company should have any interference by the Govt. BUT every founder/owner/CEO should think about their people first. Is this even possible ? I really hope so. "Moral Capitalism" anyone ?
Disclaimer: I run a small private company of 12 of us and I struggle with this everyday.
One theory of ethics holds that it is in your long-term interest to behave ethically, even if you can't know for certain what the constraints are. They encode a heuristic wisdom for survival, and that's why we have ethics at all. But many will fail to follow that, and if they are punished in the end, it's only after many others suffer -- and are not made whole by your punishment.
This amounts to an ideological viewpoint, however it doesn't map to reality. If the government doesn't step in, the worst of the worst will sift up to the top, and the most complacent will sift to the bottom. It's how things naturally fall into place.
Exploitative people in an unchecked market have an unmatched advantage. If you believe in real market competition, then pure capitalism cannot work because it stifles competition by creating unfair disadvantages for CEOs who think about their people, discouraging them from acting benevolently.
The problem is that you see the government as this authoritarian beast who must be kept in a cage for the safety of its people, when in reality a healthy government is its people. Government regulations in a free market are a result of the consumers who participate in the market wanting protection.
In the end, you either favor consumer protection or corporate protection. Which seems more moral to you?
Pick one. Couldn't have said it better. This is what people ALWAYS have to remember. And as a reminder, the corporation will always take care of the corporation.
It's not a problem that can be solved by individual business owners, no matter how moral they are, because at its root it's a collective action problem (https://en.wikipedia.org/wiki/Collective_action_problem). The more business owners sign on to a platform of "moral capitalism," the bigger the opportunity created for the first business owner willing to act immorally, and thus the greater the temptation there will be to do so. Eventually the temptation becomes great enough that someone breaks ranks, and then everyone else has to follow or risk being put out of business. The race always ends in a sprint towards the bottom.
This is why we have regulation; the only way to cut this knot is for some external entity to force everybody to play by the same rules. It's the only way to prevent honest businesses from getting eaten alive by the dishonest ones. It's not a perfect system, but it's the best one anyone's come up with so far.
On an unrelated note, Italy has never had a tech startup worth a billion dollars.
"We pioneered a “space-as-a-service” membership model that offers the benefits of a collaborative culture, the flexibility to scale workspace up and down as needed and the power of a worldwide community, all for a lower cost. Through iterative product development at scale and significant investment in technology infrastructure, we have demonstrated that we can build better solutions for less money. We are changing the way people work globally and, in the process, we have disrupted the largest asset class in the world—real estate."
Edit: I just noticed that it continues with a MUCH better statement on the next page:
"Technology is at the foundation of our global platform. Our purpose-built technology and operational expertise has allowed us to scale our core WeWork space-as-a-service offering quickly, while improving the quality of our solutions and decreasing the cost to find, build, fill and run our spaces. We have approximately 1,000 engineers, product designers and machine learning scientists that are dedicated to building, integrating and automating the complex systems we use to operate our business. As a result, we are able to deliver a premium experience to our members at a lower price relative to traditional alternatives."
So uhh, honest question. What were they trying to build with those 1,000 engineers/designers/ML scientists? The company literally leases (not buys) office space to then lease out to their customers. I never understood why this business model needs "significant investment into Tech infrastructure"
- Telecom Italia (telecommunications services): $83.6 billion, up 12.5%
- Atlantia (infrastructure, mobility networks): $48.7 billion, up 17.3%
- Leonardo (aerospace, defense): $30.1 billion, up 12.4%
http://www.worldstopexports.com/italys-top-10-major-export-c...
if the company made a bad hire and kept that person around does that count as mis-managin? What if they had to fire them to save the company?
Why are people mad about this? Dude is a modern Robin Hood -- a national hero. Let him keep the $1.7B change.
He was in this to build an empire and a dynasty. He tried to write his family into leadership / ownership in perpetuity.
He wasn't freeing money from the "dumb, rich, foreign investors" for the good of the people, but for the good of himself. Anything that fell to the people was happenstance, and after he'd had first pickings.
They did invest in Alibaba as well as ARM and Uber and runs the SoftBank Vision Fund. They may have failed huge on this one but have been doing quite good.