[🛑 IPO] WeWork - The We Company 🏢

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So this We thing could be “valued” at $10 billion, says Reuters.

It’d still be a :unicorn:.

:innocent:

Private Equity vs Venture Capital in a nutshell:

Very high level explanation - a PE firm takes a stake in a target firm, place mostly debt via loans or bonds on its balance sheet (why takes the risk?) as part of the acquisition, invests some cash into equity and thus, in the event of a sale, make a significantly higher return - thanks to the debt which the company now has to serve - when they sell it at a higher valuation.

If PE firms “lose” (read - Phones4U), they lose the cash-equity part only.

Angel investors and Venture Capital firms like to invest cash and get equity in return. If they lose, they lose it all. If they win, they win.

Remember that We has a ton of debt. And most of it is in lease agreements, off-balance sheet or not (on-balance sheet long-term leases were $17.9 billion as of 30 June 2019. Turns out Rhone - a related-party, a “landlord”, and a private equity company - is among the lessors.

We is taking/given money from/to private-equity (Rhone) and venture capital (Softbank).

We and Rhone/ARK have been scratching each others’ backs at the expense of Softbank and now Softbank wants to get out and pass on the potato to public investors.

:woman_shrugging:

How many landlords does We have?

So Neumann is a landlord. Then Rhone is a landlord - from NYT in August:

One of WeWork’s key backers is also a landlord to the company, raising questions as to whether the startup’s business model is riddled with ethical issues.

Rhone Group co-founder Steven Langman was an early investor in the New York-based office space company. According to The Wall Street Journal, the private equity dealmaker also runs a fund that leases properties to WeWork, raising conflict-of-interest concerns similar to those that founder and CEO Adam Neumann faced in January of this year.

Rhone who?

Do you guys remember ARK - that innovative holdco they set up ahead of the IPO? In The S-1’s Risk Factors section they highlighted “possible conflicts of interest”?

So maybe people should stop complaining as if they were not given enough warnings :ghost: - just take our money:

We have engaged in transactions with related parties, and such transactions present possible conflicts of interest that could have an adverse effect on our business and results of operations.

…we have entered into several transactions with our Co-Founder and Chief Executive Officer, Adam Neumann, including leases with landlord entities in which Adam has or had a significant ownership interest . We have similarly entered into leases with landlord entities in which other members of our board of directors have a significant ownership interest, such as through ARK (as defined in “Business—Our Organizational Structure—ARK”)

This is that Adam Nuemann, Rebekah and Kids - ARK - structure from the IPO doc, in a nutshell. Nothing to see here, just a corporate structure:

Zoom in:

Who is Rhone Group?:

ARK Investment Group Master GP LP (“ARK Master GP”) holds an indirect general partnership interest in each real estate acquisition vehicle managed or sponsored by ARK. ARK Master GP is owned approximately 80% by us and 20% by Rhône Group L.L.C. and Rhône Capital L.L.C. (together, the “Rhône Group”).

Rhone is a private equity firm. They take fees, because they are a private equity firm. One of We’s directors co-founded Rhone:

This is their website. It’s very private equity-like:

So Rhone and ARK are treating the whole thing as a real estate investment play squeezing money out of We or something:

Not surprising any more:

Not an expert in real estate or an expert in anything, but maybe it is meant to be confusing.

This is a good read - a Forbes article that just came out today:

How many of WeWork / We Co.'s investors and potential investors know that We Co.'s NYC roomies Rhone Group are hot to trot as newly licensed investment banking principals?

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The Prof at it again @saf ! Waiting for the next JPM earnings call:


Source - https://twitter.com/profgalloway/status/1172717058234208256

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:point_down: :popcorn: :

WeWork’s board of directors met on Monday evening to discuss delaying the property group’s initial public offering after the company struggled to drum up investor interest in the multibillion-dollar listing, according to people briefed on the matter. FT

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The FT - WeWork’s Adam Neumann admits to being ‘humbled’:

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WeWork’s chief executive Adam Neumann told employees he had been “humbled” by the aborted initial public offering of his lossmaking property group, admitting he needed to learn lessons about running a public company.

The 40-year-old co-founder said he believed he knew how to run a private company, but that he had since received feedback on the role he needed to play as a leader of a soon-to-be public group.

After his presentation, Mr Neumann did not take questions from employees, who have watched on the sidelines as WeWork’s advisers slashed the group’s $47bn valuation in their attempts to drum up investor interest.

John McClain, a portfolio manager at Diamond Hill Capital Management, said he could not remember another unicorn — a privately held start-up valued at more than $1bn — having “zero support from either debt or equity investors”.

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tl;dr for this topic: WeWork doesn’t work.

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But even all these drastic steps were not enough to comfort Wall Street investors. Not even the attempts to slash the company’s valuation to below $10 billion could attract enough investor interest to the public offering. And the opacity of The We Company’s reporting and metrics likely did nothing to help matters in the eyes of the investing public.

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someimagething

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That’s hilarious :rofl: Guess We needs a WeFix ( or is it Wee Fix )

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Don’t work out of WeWork @shane-aurora and everyone - since 2015 their Wifi has been :poop: :



[Update 1]

WeWTF, Part Deux by Scott Galloway

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Love this and at the same time strangely feel sorry for the guy

:ok_hand: @saf

From the Prof G:

His response to them was on point :joy:

https://on.ft.com/2M1ldHK

WeWork debacle spells end of private company ‘glory days’, says Capital Group head

“Your business has to make sense” - Adam Neumann in 2017

From the commencement speech he did a few years back. Some actually good advice.

“Build a great product…”

"Your business has to make sense. “If your business is not making sense, if you’re not profitable at the end, yes, there are a few companies we hear about them, they lose a lot of money every month, don’t build that. Build a business that’s actually meaningful and also has a significant and powerful business model because that will make everything work.”

“And, if you have purpose and you have the right people and you have a great product, I guarantee you that profits will come.”

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Edit:

Why would Masayoshi, an intelligent individual, invest so many billions into this barefaced fraud, for the life of me I cant figure it out. Maybe Adam & Miguel deceived him too. Or it could actually really be as simple as it looks. It’s impossible for Adam, Miguel and Masayoshi to sell their shares on the secondary market or post-IPO for $100bn+ if Masayoshi didn’t allow Adam & Miguel to parade WeWork in the press as being worth $47 billion, using purely Softbank’s 9 sole investments & revaluations.

This is what perplexes me and a lot of other people. I don’t get why Softbank invested and so many times. And they considered putting another $16B in recently but the Saudis said they’d cash out of the Vision Fund.

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