6 ms·

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 middle

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.
    - wcfields 8y ago
      Ditto here, however unlike some other commenters, we're an ad agency. They work for our satellite offices in Denver (one designer) and London (two account people).
- JumpCrisscross 8y ago
  > it's being heavily dependent financially on other risky companies WeWork has a creative solution to this vulnerability: "In mid-2017, the giant landlord Brookfield Property Partners L.P was in advanced talks to buy the Lord & Taylor department store building in New York City for about $700 million, when an unexpected buyer swooped in and sealed a deal... Behind the deal was WeWork Cos., which put together the $850 million purchase... WeWork didn’t put up the money. Instead, it came from a new real estate fund co-managed by WeWork and one of its early shareholders, private-equity firm Rhône Group. The fund aims to raise tens of billions of dollars from investors in coming years to buy buildings where WeWork would become a tenant, people familiar with the fund said." https://www.wsj.com/articles/wework-the-workspace-giant-wants-to-be-its-own-landlord-using-other-investors-money-1526212801 https://www.wsj.com/articles/wework-the-workspace-giant-want...

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.
  - wcfields 8y ago
    Ditto here, however unlike some other commenters, we're an ad agency. They work for our satellite offices in Denver (one designer) and London (two account people).
JumpCrisscross 8y ago
> it's being heavily dependent financially on other risky companies WeWork has a creative solution to this vulnerability: "In mid-2017, the giant landlord Brookfield Property Partners L.P was in advanced talks to buy the Lord & Taylor department store building in New York City for about $700 million, when an unexpected buyer swooped in and sealed a deal... Behind the deal was WeWork Cos., which put together the $850 million purchase... WeWork didn’t put up the money. Instead, it came from a new real estate fund co-managed by WeWork and one of its early shareholders, private-equity firm Rhône Group. The fund aims to raise tens of billions of dollars from investors in coming years to buy buildings where WeWork would become a tenant, people familiar with the fund said." https://www.wsj.com/articles/wework-the-workspace-giant-wants-to-be-its-own-landlord-using-other-investors-money-1526212801 https://www.wsj.com/articles/wework-the-workspace-giant-want...