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The icing on the cake in this article is the following picture caption: "Mitch Lowe, chief executive of MoviePass, in the company’s office at a WeWork in Manha

The icing on the cake in this article is the following picture caption: "Mitch Lowe, chief executive of MoviePass, in the company’s office at a WeWork in Manhattan." So the movie company selling dollar bills for half price is leasing their HQ from a real estate company that owns no physical asssets but has $5b in upcoming leasing liabilities as they proudly arbitrage 15 year triple net leases into 1 - 3 year terms for startups. At some point the gas on the fire will stop and it may be awful cold for a while.

wyattpeak 8y ago
I'm with you on MoviePass, but I'm unconvinced there's any problem with WeWork's business model. Lacking any assets or output of their own hasn't stopped middlemen from making a mint since the invention of trade.
- cjensen 8y ago
  Sure. But WeWork isn't making any money as a middleman. And their debt is already down to junk.
  - wyattpeak 8y ago
    Oh shit, you're right. My mistake, I just assumed they were profitable given the seemingly solid revenue model and fairly high rents.
  - btown 8y ago
    > their debt is already down to junk For those unaware, this is not a metaphor. https://www.wsj.com/articles/weworks-debt-receives-junk-rating-1524604393 https://www.wsj.com/articles/weworks-debt-receives-junk-rati... https://www.bloomberg.com/gadfly/articles/2018-04-25/wework-s-junk-bond-adventure-raises-18-billion-question https://www.bloomberg.com/gadfly/articles/2018-04-25/wework-...
  - walterbell 8y ago
    What would happen to the CRE market if WeWork goes under?
- smacktoward 8y ago
  The problem isn't the lack of assets, it's being heavily dependent financially on other risky companies. This is part of what happened in the dot-com bust -- lots of media properties went under because their advertising portfolio depended heavily on splashy advertising buys from well-funded startups, so when the startups failed and the ads suddenly stopped coming, those publications' balance sheets rather suddenly went from boom to bankruptcy. To apply to this case: WeWork's services are aimed very heavily at startups, small design/creative operations and solo operators, all of whom could easily be floating at the moment upon the same bubble. If that bubble were to burst, those customers would vanish and WeWork would be in a heap of trouble.
  - Fomite 8y ago
    This. A middle-man can handle some of their clients failing. The problem is that, at my guess, WeWork's clients have highly correlated failure rates.
  - raverbashing 8y ago
    Hummm big companies relying on end buyers of real-estate products to keep being able to honor their commitments, where did I hear that before.
  - luckydata 8y ago
    I suspect they get plenty of business from established companies that need extra space or a way to bootstrap offices in new locations. Linkedin, for example, used them to open the Detroit office.
    - dionidium 8y ago
      My company has a "real" HQ and then satellite teams at a few different WeWorks. Anecdotally, lots of other people in this WeWork are in similar situations. But I'm still not sure it totally invalidates the larger point; if business were to slow, these offices would probably be the first to go.
      - 8y ago
thotaway 8y ago
It seems that you, and most of the people who have replied to you, would rather live in a world where people don’t spend capital on taking risks that potentially move the world forward. What are you doing on Y Combinator’s news site? And how have these sort of opinions become popular, the norm on here? I’m so confused.
- ryanx435 8y ago
  There's taking risk, and then there is taking risk with a solid understanding of what the risks are and how to mitigate them. Two entirely different things.
- umanwizard 8y ago
  HN isn't really startup-focused, beyond sharing a domain name with YC. I for one go on HN every day and don't particularly care about startups.
- IncRnd 8y ago
  > And how have these sort of opinions become popular The parent wasn't sharing opinions but facts.
Nasrudith 8y ago
That setup sounds awfully like Hollywood Accounting and several other (possibly technically legal) accounting scams.

wyattpeak 8y ago

I'm with you on MoviePass, but I'm unconvinced there's any problem with WeWork's business model. Lacking any assets or output of their own hasn't stopped middlemen from making a mint since the invention of trade.

cjensen 8y ago
Sure. But WeWork isn't making any money as a middleman. And their debt is already down to junk.
- wyattpeak 8y ago
  Oh shit, you're right. My mistake, I just assumed they were profitable given the seemingly solid revenue model and fairly high rents.
- btown 8y ago
  > their debt is already down to junk For those unaware, this is not a metaphor. https://www.wsj.com/articles/weworks-debt-receives-junk-rating-1524604393 https://www.wsj.com/articles/weworks-debt-receives-junk-rati... https://www.bloomberg.com/gadfly/articles/2018-04-25/wework-s-junk-bond-adventure-raises-18-billion-question https://www.bloomberg.com/gadfly/articles/2018-04-25/wework-...
- walterbell 8y ago
  What would happen to the CRE market if WeWork goes under?
smacktoward 8y ago
The problem isn't the lack of assets, it's being heavily dependent financially on other risky companies. This is part of what happened in the dot-com bust -- lots of media properties went under because their advertising portfolio depended heavily on splashy advertising buys from well-funded startups, so when the startups failed and the ads suddenly stopped coming, those publications' balance sheets rather suddenly went from boom to bankruptcy. To apply to this case: WeWork's services are aimed very heavily at startups, small design/creative operations and solo operators, all of whom could easily be floating at the moment upon the same bubble. If that bubble were to burst, those customers would vanish and WeWork would be in a heap of trouble.
- Fomite 8y ago
  This. A middle-man can handle some of their clients failing. The problem is that, at my guess, WeWork's clients have highly correlated failure rates.
- raverbashing 8y ago
  Hummm big companies relying on end buyers of real-estate products to keep being able to honor their commitments, where did I hear that before.
- luckydata 8y ago
  I suspect they get plenty of business from established companies that need extra space or a way to bootstrap offices in new locations. Linkedin, for example, used them to open the Detroit office.
  - dionidium 8y ago
    My company has a "real" HQ and then satellite teams at a few different WeWorks. Anecdotally, lots of other people in this WeWork are in similar situations. But I'm still not sure it totally invalidates the larger point; if business were to slow, these offices would probably be the first to go.
    - 8y ago

thotaway 8y ago

It seems that you, and most of the people who have replied to you, would rather live in a world where people don’t spend capital on taking risks that potentially move the world forward. What are you doing on Y Combinator’s news site? And how have these sort of opinions become popular, the norm on here? I’m so confused.

ryanx435 8y ago
There's taking risk, and then there is taking risk with a solid understanding of what the risks are and how to mitigate them. Two entirely different things.
umanwizard 8y ago
HN isn't really startup-focused, beyond sharing a domain name with YC. I for one go on HN every day and don't particularly care about startups.
IncRnd 8y ago
> And how have these sort of opinions become popular The parent wasn't sharing opinions but facts.

Nasrudith 8y ago

That setup sounds awfully like Hollywood Accounting and several other (possibly technically legal) accounting scams.