WeWork - WE - Share Chat

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Bet he wishes he never said what ARK really was - from Bloomberg Businessweek in May 2019:

“Everyone wants to know what ARK is. I think it’s going to be amazing,”
…
… “ARK’s job is to leverage external money, off balance sheet,”
…

You aren’y going to see ARK’s financials because it sits outside the WeWork’s corporate structure.

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Neumann tells me he wants this article to teach a lesson, one that has little to do with his company’s on-paper performance. “I think your readers need a little bit of that. Not just numbers. Give them something they can use,” he says. “So that when someone reads, they might say, like, ‘Hey, I can create value. I can embrace change. I can be a better version of myself.’ ” It’s the same tone as the neon slogans on the walls, but with a slightly different point: Don’t sweat our cash, our space, our demand. We’re here to talk about you.

https://www.bloomberg.com/news/features/2019-05-15/wework-wants-to-be-its-own-landlord-it-also-wants-2-8-billion

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:eyes::

Toward the end of the piece, Neumann asks Bloomberg journalist Ellen Huet what her superpower is, he then responded with his own. “My superpower is change,” he said, “and change is painful.”

Neumann’s approach is in-keeping the company’s mission on its website: “A place you join as an individual, ‘me,’ but where you become part of a greater ‘we,’” it writes. “A place where we’re redefining success measured by personal fulfillment, not just the bottom line. Community is our catalyst.”

(Source - Cult of WeWork Laid Bare in a Revealing Interview With Adam Neumann)

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Also, regarding the whole is it a real-estate play or a tech play:

“If you had positioned this as a real-estate company, it wouldn’t be worth this,” Barry Sternlicht, who runs Starwood Capital Group LLC, told The Wall Street Journal in 2017. "Mr. Neumann “dressed it up and made it into a community, and that turned it into a tech play.”

(Source - Cult of WeWork Laid Bare in a Revealing Interview With Adam Neumann)

The S-1 says :

“The entire member experience is powered by technology designed to enable our members to manage their own space, make connections among each other and access products and services, all with the goal of increasing our members’ productivity, happiness and success.”

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This is also in the S-1 filing - WeWork “may elect not to comply with certain corporate governance standards” (e.g. compensation committee for the board…):

Because Adam will control a majority of our outstanding voting power, we will be a “controlled company” under the corporate governance rules for [BLANK]-listed companies. Therefore, we may elect not to comply with certain corporate governance standards, such as the requirement that our board of directors have a compensation committee and nominating and corporate governance committee composed entirely of independent directors. For at least some period following completion of this offering, we intend to take advantage of these exemptions.

But prior to that—in response to the reports that the CEO leases properties to WeWork—WeWork said they a have review process for related party transactions (Fortune magazine in January 2019):

A company statement said, “WeWork has a review process in place for related party transactions. Those transactions are reviewed and approved by the board, and they are disclosed to investors.”

(Source - WeWork CEO Adam Neumann Responds to Conflict of Interest Report | Fortune)

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Up is down, down is up.

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63

I’m on holiday :beach_umbrella: near a beach but WeHaveToWork.

USD 47.2 billion of lease commitments?

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Earlier in this thread:

This “effective debt” figure, taking into account (pun unintended) commitments on leases, may be higher given the huge lease commitments—by Bloomberg Opinion:

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A bit of background here:

The Financial Accounting Standards Board sets the rules for companies who reported under US GAAP (the IFRS equivalent), or something like that.

In early 2016, the FASB issued a new rule—ASC 842—going into effect December 2018—that stated that off-balance sheet leases of over 12 months are to be reflected on the balance sheet:

The new leases standard will increase transparency and comparability among organizations that lease buildings, equipment, and other assets by recognizing the assets and liabilities that arise from lease transactions. In other words, current off-balance sheet leasing activities will be required to be reflected on balance sheets so that investors and other users of financial statements can more readily and accurately understand the rights and obligations associated with these transactions.

(IFRS 16 (under international standards) is the equivalent of ASC 842)

(Source — FASB).

Also read this:

It seems WeWork is fully aware of the impact the FASB rule is having. The company referenced the rule, ASC 842, 44 times in the filing.

And this:

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64

They’re gonna need a lot more than $5.9M “recovered” to become investable

https://www.cnbc.com/2019/09/04/wework-ceo-returns-5point9-million-the-company-paid-for-we-trademark.html

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And now it looks like the IPO valuation has been slashed down to around $25B from $40B+.

https://www.bloomberg.com/news/articles/2019-09-05/wework-is-said-to-target-20-billion-to-30-billion-ipo-value

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66

I’m getting Uber deja vu or deja vuber if you will :sweat_smile:

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67

A “down round” so to speak - by 15 billion dollars only - will send clear signals to perspective investors that the worst is over.

Said noone ever.

They need that liquidity cash money or they become an effectively distressed unicorn. A simple cash flow analysis from earlier in this thread showed they relied on externally sourced billions just to stay afloat.

Desperate they are.

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68

“At 20 billion [USD] this thing makes no sense” - Professor Galloway

The founder “trying to go on a roadshow” to convince people to buy shares “he can’t sell fast enough”.

“If the company doesn’t make sense it usually is not a good stock to own”.

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https://www.bloomberg.com/news/videos/2019-09-05/wework-isn-t-worth-anywhere-near-20-billion-nyu-s-galloway-says-video

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“WeWork is exhausting people’s cynicism”

The CEO, Adam Neumann, is a ex-shoe salesman (for real). He, or We, can’t get a $ 6 billion credit line from a bank unless the IPO goes ahead and WeWork raises $ 3 billion. When the facts are not presented in the right order, it’s probably desperation. Here’s what he allegedly said to analysts during the IPO roadshow:

“If Wells Fargo, the largest lender in this country, can get comfortable with this, then everybody should… I’m most proud of Wells Fargo coming in. Who’s here from Wells Fargo? Thank you, thank you,”

(Source - Bloomberg)

Rett:

“I’ve heard no bullish views at all,” said Rett Wallace, chief executive of Triton Research, which analyzes pre-IPO companies for investors. “There were Uber bulls, there were Lyft bulls, there were Snap bulls.” He added that “WeWork is exhausting people’s cynicism.”

(Source - Bloomberg)

More $ from the Softbank of last resort?

WSJ via Bloomberg:

Adam Neumann, We’s co-founder and chief executive, flew to Tokyo last week to meet one of the company’s biggest investors, SoftBank Group Chief Executive Masayoshi Son, and members of his team, the people said. There, they discussed the possibility of an additional infusion of capital, multiple people briefed on the meeting said.

Among the possibilities they discussed was SoftBank serving as an anchor investor in the IPO by buying a significant portion of the roughly $3 billion to $4 billion the company is expected to raise. They also discussed whether SoftBank might invest a chunk of money that would allow We to delay its IPO until 2020, people familiar with the conversations said.

…
…

WeWork “could soon become a $65 billion company. That’s what Goldman Sachs Group Inc. bankers were saying only earlier this year.” (Bloomberg).

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I’m watching Halftime Report. They’re doing a special Silicon Valley show out on the west coast. The two guests GGV Capital’s Jeff Richard and Twitter ex-CEO Dick Costolo are absolutely slating Neumann and WeWork. Just saying it’s flat out not a tech company (which we knew) and that the CEO muddied the financials during the S1.

They seem bullish on Peloton

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Softbank is trying to raise money for its fund, reportedly telling We Work to let go of the IPO. Meanwhile, the IPO advisors are testing the $15-20 billion range apparently.

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SoftBank, the biggest outside shareholder in WeWork, is urging the lossmaking property group to shelve its hotly anticipated initial public offering after it received a cool reception from investors, according to people briefed on the discussions.

…

Advisors for the We Company were said to still be testing investor appetite at a valuation of between $15bn and $20bn, according to people briefed on the matter. That is far below the $47bn valuation given to WeWork when SoftBank invested $2bn in the business this year.

SoftBank itself is trying to raise $108bn for a second Vision Fund to invest in technology start-ups. The Japanese group could face challenges raising that sum if the We Company were to list at a steep discount to its last funding round, the people said.

WeWork is set to receive $1.5bn from SoftBank next year as part of an agreement struck at the start of this year…

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I love the idea of the vision fund from an investing perspective but I just think wework is as blind as a bat.

For this reason I’ve been looking at softbank shares themselves. My hope was for wework to IPO and buy the softbank dip

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amirite

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If you ever feel bored, google Softbank and how it funds itself. It is burdened by $ 65 billion of debt (estimated by Moody’s) and is rated “junk” by that credit rating agency (Ba1).

However:

Bankers Find New Reasons to Keep Lending to SoftBank

‘Decisions come down to game theory,’ one banker says, where a loan decision hinges on what each bank thinks other banks will do

(May 2019, Wall Street Journal)

Also:

Moody’s in July 2019:

SBG’s commitment is substantial relative to its current balance sheet with about JPY7.2 trillion ($65 billion) of debt and the market value of its holdings. Pro forma, for illustrative purposes, if SBG funds its entire $38 billion SVF II investment upfront entirely with debt, its leverage would rise slightly above the 35% high end of Moody’s assumed range. This scenario would also further weaken the SBG holding company’s interest coverage, which is already close to 1x.

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75

Fidelity cut its valuation on We Co. to USD 18.3 billion in March - pre-IPO - with a predicted valuation at around USD 15 billion…

“We are making a capitalist kibbutz,” Neumann said in a 2017 interview…

…

Neumann probably isn’t hurting for cash, even with a delay. He has already pledged some of his stock to secure a line of credit of as much as $500 million from affiliates of UBS Group AG, JPMorgan Chase & Co. and Credit Suisse Group AG, according to last month’s prospectus. About $380 million of that total was outstanding at the end of July.

Guess what may happen to pledged shares (agains loans) when the value goes down…

Source - Bloomberg

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76

Fitch downgrades WeWork to single B, stable outlook.

That’s a very junk rating in the high yield world of bonds.

:poop:

Meanwhile, WeWork may have to fund itself through expensive debt issuance due to its very low credit rating.

https://www.bloomberg.com/news/articles/2019-09-09/wework-may-sell-a-lot-of-junk-bonds-just-like-netflix-executive

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WeWork to list on Nasdaq

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@engineer WeWork to drop their fake tech company tag and decide to become a REIT :rofl::rofl::rofl:

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“You can’t make a good deal with a bad person.”
…
If you even have to ask yourself the question “Do I trust this person?” you should immediately leave the negotiating table and look for more honest company with whom to do business.

Source - The Tao of Warren Buffett - by Mary Buffett, David Clark

The CEO has cashed out $700 million ahead of the IPO. He’s already abandoned the ship. Why would anyone trust him now? So the company makes some cosmetic changes to its structure, adds a few “independent” people and “it’s all good, can I have your money now?”.

  1. Raising $3 billion for We Co. would unlock a $6 billion credit line. WeWork probably needs that money to carry on leasing long and renting out short until the musical chairs game stops.

  2. After the “do or die” IPO, Softbank - which owns about less than 1/3 of WeWork - is happy. Softbank’s investors are happy.

  3. Softbank can now try to raise billions for its new “vision fund” without the We Work IPO (and UBER IPO) overhang.

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