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"Clearest economic model"? They're losing almost 2 BILLION dollars a year (https://www.nytimes.com/2019/03/25/business/dealbook/wework-loss-billion.html https:/

"Clearest economic model"? They're losing almost 2 BILLION dollars a year (https://www.nytimes.com/2019/03/25/business/dealbook/wework-loss-billion.html https://www.nytimes.com/2019/03/25/business/dealbook/wework-...)

idlewords 7y ago
They lease property long-term, then rent it out short-term at a staggering loss. That's a model of clarity
- itamarst 7y ago
  Fair. I used to work at company that rented from WeWork. And we were in their awful glass cubicles, like working in a Borg ship, and we wanted some privacy, so we asked about putting up some removal decals. They said no, it violated their brand guidelines. Clarity, always clarity.
  - idlewords 7y ago
    That is true commitment to transparency.
  - kevin_thibedeau 7y ago
    Just build a cubicle within your cubicle.
warent 7y ago
Their revenue growth is accelerating and they're only losing money because they're investing it all on growth. The year they stop expanding/buying/renting new spaces, they'll bring in a huge net profit.
- itamarst 7y ago
  "Sure, we lose a little on every sale, but we make it up on volume!"
  - deleted 7y ago
    [deleted]
  - temp1831 7y ago
    No, and I don't think you did a decent job trying to interpret what he said.
  - e40 7y ago
    That's not it at all.
- kgwgk 7y ago
  The magic of adjustments: ebitla-dee-da (comment about WeWork's “Community Adjusted Ebitda”) https://ftalphaville.ft.com/2018/04/26/1524715201000/The-magic-of-adjustments--ebitla-dee-da/ https://ftalphaville.ft.com/2018/04/26/1524715201000/The-mag...
chadash 7y ago
Their economic model can be clear and simple even if it isn't profitable. At it's core, the model is: a) buy or rent commercial real estate b) rent that same real estate out to people who want office space As long as the money coming in from b is sufficiently greater than the money being spent on a, you should be good. As far as profitability, the company is making investments now that will pay back over time. Since they are growing quickly, you'd expect them to take a loss since they have to make upfront investments in new offices (and on real estate, which they seem to be getting into the business of purchasing outright rather than taking out long term leases). EDIT: I don't have an opinion one way or another on whether WeWork is a good business to invest in or not, but it's definitely a straightforward and easy to understand business, as opposed to say, a bank or a biotech company.
- cm2187 7y ago
  And commercial real estate never goes down...
- nebolo 7y ago
  I think the model is rather: a) buy long-term leases at low price b) sell short-term leases at high price The problem with this model is that when demand for real estate falls (e.g. because of economic cycles, trends/tastes, etc.) the revenues will evaporate and the costs will remain.
  - JackFr 7y ago
    It's like the old joke: If you can't pay back a $1 million loan, you have a problem. If you can't pay back your $1 billion loan, the bank has a problem. If WeWork can't pay the lease on 29,000 square feet of office space, WeWork has a problem. If they can't pay the lease on 2.9 million square feet of office space, the owners have a problem.
    - DesiLurker 7y ago
      that is true only when WeWork may be in danger of filing bankruptcy, otherwise contract law prevails.

idlewords 7y ago

They lease property long-term, then rent it out short-term at a staggering loss. That's a model of clarity

itamarst 7y ago
Fair. I used to work at company that rented from WeWork. And we were in their awful glass cubicles, like working in a Borg ship, and we wanted some privacy, so we asked about putting up some removal decals. They said no, it violated their brand guidelines. Clarity, always clarity.
- idlewords 7y ago
  That is true commitment to transparency.
- kevin_thibedeau 7y ago
  Just build a cubicle within your cubicle.

warent 7y ago

Their revenue growth is accelerating and they're only losing money because they're investing it all on growth. The year they stop expanding/buying/renting new spaces, they'll bring in a huge net profit.

itamarst 7y ago
"Sure, we lose a little on every sale, but we make it up on volume!"
- deleted 7y ago
  [deleted]
- temp1831 7y ago
  No, and I don't think you did a decent job trying to interpret what he said.
- e40 7y ago
  That's not it at all.
kgwgk 7y ago
The magic of adjustments: ebitla-dee-da (comment about WeWork's “Community Adjusted Ebitda”) https://ftalphaville.ft.com/2018/04/26/1524715201000/The-magic-of-adjustments--ebitla-dee-da/ https://ftalphaville.ft.com/2018/04/26/1524715201000/The-mag...

chadash 7y ago

Their economic model can be clear and simple even if it isn't profitable. At it's core, the model is: a) buy or rent commercial real estate b) rent that same real estate out to people who want office space As long as the money coming in from b is sufficiently greater than the money being spent on a, you should be good. As far as profitability, the company is making investments now that will pay back over time. Since they are growing quickly, you'd expect them to take a loss since they have to make upfront investments in new offices (and on real estate, which they seem to be getting into the business of purchasing outright rather than taking out long term leases). EDIT: I don't have an opinion one way or another on whether WeWork is a good business to invest in or not, but it's definitely a straightforward and easy to understand business, as opposed to say, a bank or a biotech company.

cm2187 7y ago
And commercial real estate never goes down...
nebolo 7y ago
I think the model is rather: a) buy long-term leases at low price b) sell short-term leases at high price The problem with this model is that when demand for real estate falls (e.g. because of economic cycles, trends/tastes, etc.) the revenues will evaporate and the costs will remain.
- JackFr 7y ago
  It's like the old joke: If you can't pay back a $1 million loan, you have a problem. If you can't pay back your $1 billion loan, the bank has a problem. If WeWork can't pay the lease on 29,000 square feet of office space, WeWork has a problem. If they can't pay the lease on 2.9 million square feet of office space, the owners have a problem.
  - DesiLurker 7y ago
    that is true only when WeWork may be in danger of filing bankruptcy, otherwise contract law prevails.