4 ms·

But WeWork seems like an overly stupid investment to make, no? Uber was a calculated risk. But WeWork?? They better hope they can sell some stock at IPO and WeW

But WeWork seems like an overly stupid investment to make, no? Uber was a calculated risk. But WeWork?? They better hope they can sell some stock at IPO and WeWork’s stock doesn’t totally tank during the holding period. WeWork could pretty easily result in billions in losses.

empath75 7y ago
WeWork just seems like outright fraud to me with a self-dealing CEO and with a lot of liabilities in the form of long term leases that they will never make a profit from.
- thedudeabides5 7y ago
  Well if there's no inflation. Now, if we got some inflation, those leases would start to look pretty cheap. Then the debt turns into equity, viola! See lowering interest rates to 0 is fun.
  - joelx 7y ago
    This comment was downvoted for snark, but the point is accurate. Inflation could double rental prices and then all of Wework leases will be worth a lot.
    - superwayne 7y ago
      Aren't leases usually inflation adjusted?
      - piva00 7y ago
        In most places it's usually completely dependent on the contract, if you are a big leaser (such as WeWork) you can leverage a lot of terms just by having money and paying upfront.
        joelx 7y ago
        I have never seen an inflation adjusted lease in any of the commercial leases I've done.
pmart123 7y ago
My guess is that SoftBank believes it has covered the worst case scenario for its WeWork investment through its preferred stock liquidation preference and WeWorks real estate assets (although I believe they mostly have leases). It still seems like a big gamble, but I suppose they think they either can get the company to IPO, or they will end up owning most of the company.
sjg007 7y ago
Why is WeWork a stupid investment?
- opencl 7y ago
  Probably because their margins are roughly -100%.
8ytecoder 7y ago
WeWork the tech company and WeWork the REIT are two forms of the same company. The tech company is high risk. The real estate portion is backed by assets.
- harryh 7y ago
  WeWork owns very little property. For the most part they rent all the space that they then sublease to other tenants.
  - 8ytecoder 7y ago
    https://www.businessinsider.com/wework-ark-fund-to-buy-commerical-properties-2019-5 https://www.businessinsider.com/wework-ark-fund-to-buy-comme...
  - tyingq 7y ago
    The CEO apparently personally owns some properties and self deals them back to WeWork on lease terms. https://www.businessinsider.com/wework-ceo-adam-neumann-office-space-landlord-2019-1 https://www.businessinsider.com/wework-ceo-adam-neumann-offi...
gingabriska 7y ago
Even if their investments aren't profitable, it's still better for humanity as this money is being invested in innovative ideas. While Saudis might have invested into building yet another Mosque or Tomb. In India Taj Mahal reported costed Mugols lack chunk of GDP.
- tareqak 7y ago
  Saudi Arabia doesn’t spend money on tombs. > Per Islamic tradition, his funeral was held the same day, a public ceremony at the Grand Mosque of Riyadh before burial in an unmarked grave at the Al Oud cemetery. [0] [0] https://en.wikipedia.org/w/index.php?title=Abdullah_of_Saudi_Arabia#Illness_and_death https://en.wikipedia.org/w/index.php?title=Abdullah_of_Saudi... - > Jan. 23, 2015, 2:49 AM PST / Updated Jan. 23, 2015, 10:22 AM PST > RIYADH, Saudi Arabia — There were no golden carriages. > Friday's funeral of Saudi Arabia's King Abdullah was a relatively simple affair in line with the austere form of Islam practiced by one of the world's wealthiest ruling families. > The body of the former custodian of Islam's two holiest cities, Mecca and Medina, was bathed according to Islamic ritual. The late ruler, whose net worth has been estimated at around $20 billion, was then wrapped in two pieces of plain white cloth — the standard shroud for all Muslims. > According to tradition, nothing out of the ordinary was to be done to King Abdullah's body. It was taken to the Imam Turki Bin Abdullah Grand Mosque in the capital Riyadh for the funeral prayers at around 3:15 p.m. (7:15 a.m. ET). In line with codes that dictate that a tribal chieftain be accessible to everyone in his community, the ceremony was open to the public. Women were able to attend, sitting in the women's section of the mosque. > After the funeral, Abdullah's shrouded body was carried on a board and driven across an empty desert to Al Oud cemetery, which is home to raised graves. A black truck bearing Abdullah's body came to a stop, and Saudi royals gathered at his gravesite. His successor, the new King Salman, was dressed in a simple black gown. > A group of men lowered the pallet containing Abdullah's body to the ground, and gently tipped it toward the unmarked grave. The body was set inside the burial plot, and mourners threw handfuls of yellow-colored soil onto it. That dirt was then covered with a bed of small stones as the mourners look down. They slowly turned away, led by King Salman. > While public displays of grief are frowned on under the strict form of Wahhabi Islam practiced in the kingdom, tens of thousands are expected to pay their condolences during the three-day period of mourning. Most of the visiting will be held at the king's palace and all the senior royals will be there to receive Salman's subjects and visiting heads of state and dignitaries, including Vice President Joe Biden. > Visitors will be greeted by a line of royals arranged according to age instead of rank. [1] [1] https://www.nbcnews.com/storyline/saudi-arabia-succession/saudi-arabias-king-abdullah-given-simple-muslim-burial-n291956 https://www.nbcnews.com/storyline/saudi-arabia-succession/sa...
addicted 7y ago
Uber was a bet on a pie in the sky technology (self driven cars) and a bad one at that because Uber wasn’t even the best places to take advantage of self driving cars. Google was probably in the best position (google maps trumps the Uber app any day) followed by the car companies. Wework on the other hand has a bunch of fairly cheap leases and even better for them, they have become such big tenants for many landlords they can dictate pricing downwards if necessary. Besides, their brand is much stronger than what Uber’s was when SoftBank invested. So I’m not convinced wework is a worse investment than Uber which has absolutely no moats. Edit: Also, the strongest bull case for WeWork is basically that real estate is one of the largest industries in the planet (behind maybe energy). And how many global real estate brands exist? Almost none.

empath75 7y ago

WeWork just seems like outright fraud to me with a self-dealing CEO and with a lot of liabilities in the form of long term leases that they will never make a profit from.

thedudeabides5 7y ago
Well if there's no inflation. Now, if we got some inflation, those leases would start to look pretty cheap. Then the debt turns into equity, viola! See lowering interest rates to 0 is fun.
- joelx 7y ago
  This comment was downvoted for snark, but the point is accurate. Inflation could double rental prices and then all of Wework leases will be worth a lot.
  - superwayne 7y ago
    Aren't leases usually inflation adjusted?
    - piva00 7y ago
      In most places it's usually completely dependent on the contract, if you are a big leaser (such as WeWork) you can leverage a lot of terms just by having money and paying upfront.
      - joelx 7y ago
        I have never seen an inflation adjusted lease in any of the commercial leases I've done.

pmart123 7y ago

My guess is that SoftBank believes it has covered the worst case scenario for its WeWork investment through its preferred stock liquidation preference and WeWorks real estate assets (although I believe they mostly have leases). It still seems like a big gamble, but I suppose they think they either can get the company to IPO, or they will end up owning most of the company.

sjg007 7y ago

Why is WeWork a stupid investment?

opencl 7y ago
Probably because their margins are roughly -100%.

8ytecoder 7y ago

WeWork the tech company and WeWork the REIT are two forms of the same company. The tech company is high risk. The real estate portion is backed by assets.

harryh 7y ago
WeWork owns very little property. For the most part they rent all the space that they then sublease to other tenants.
- 8ytecoder 7y ago
  https://www.businessinsider.com/wework-ark-fund-to-buy-commerical-properties-2019-5 https://www.businessinsider.com/wework-ark-fund-to-buy-comme...
- tyingq 7y ago
  The CEO apparently personally owns some properties and self deals them back to WeWork on lease terms. https://www.businessinsider.com/wework-ceo-adam-neumann-office-space-landlord-2019-1 https://www.businessinsider.com/wework-ceo-adam-neumann-offi...

gingabriska 7y ago

Even if their investments aren't profitable, it's still better for humanity as this money is being invested in innovative ideas. While Saudis might have invested into building yet another Mosque or Tomb. In India Taj Mahal reported costed Mugols lack chunk of GDP.

tareqak 7y ago
Saudi Arabia doesn’t spend money on tombs. > Per Islamic tradition, his funeral was held the same day, a public ceremony at the Grand Mosque of Riyadh before burial in an unmarked grave at the Al Oud cemetery. [0] [0] https://en.wikipedia.org/w/index.php?title=Abdullah_of_Saudi_Arabia#Illness_and_death https://en.wikipedia.org/w/index.php?title=Abdullah_of_Saudi... - > Jan. 23, 2015, 2:49 AM PST / Updated Jan. 23, 2015, 10:22 AM PST > RIYADH, Saudi Arabia — There were no golden carriages. > Friday's funeral of Saudi Arabia's King Abdullah was a relatively simple affair in line with the austere form of Islam practiced by one of the world's wealthiest ruling families. > The body of the former custodian of Islam's two holiest cities, Mecca and Medina, was bathed according to Islamic ritual. The late ruler, whose net worth has been estimated at around $20 billion, was then wrapped in two pieces of plain white cloth — the standard shroud for all Muslims. > According to tradition, nothing out of the ordinary was to be done to King Abdullah's body. It was taken to the Imam Turki Bin Abdullah Grand Mosque in the capital Riyadh for the funeral prayers at around 3:15 p.m. (7:15 a.m. ET). In line with codes that dictate that a tribal chieftain be accessible to everyone in his community, the ceremony was open to the public. Women were able to attend, sitting in the women's section of the mosque. > After the funeral, Abdullah's shrouded body was carried on a board and driven across an empty desert to Al Oud cemetery, which is home to raised graves. A black truck bearing Abdullah's body came to a stop, and Saudi royals gathered at his gravesite. His successor, the new King Salman, was dressed in a simple black gown. > A group of men lowered the pallet containing Abdullah's body to the ground, and gently tipped it toward the unmarked grave. The body was set inside the burial plot, and mourners threw handfuls of yellow-colored soil onto it. That dirt was then covered with a bed of small stones as the mourners look down. They slowly turned away, led by King Salman. > While public displays of grief are frowned on under the strict form of Wahhabi Islam practiced in the kingdom, tens of thousands are expected to pay their condolences during the three-day period of mourning. Most of the visiting will be held at the king's palace and all the senior royals will be there to receive Salman's subjects and visiting heads of state and dignitaries, including Vice President Joe Biden. > Visitors will be greeted by a line of royals arranged according to age instead of rank. [1] [1] https://www.nbcnews.com/storyline/saudi-arabia-succession/saudi-arabias-king-abdullah-given-simple-muslim-burial-n291956 https://www.nbcnews.com/storyline/saudi-arabia-succession/sa...

addicted 7y ago

Uber was a bet on a pie in the sky technology (self driven cars) and a bad one at that because Uber wasn’t even the best places to take advantage of self driving cars. Google was probably in the best position (google maps trumps the Uber app any day) followed by the car companies. Wework on the other hand has a bunch of fairly cheap leases and even better for them, they have become such big tenants for many landlords they can dictate pricing downwards if necessary. Besides, their brand is much stronger than what Uber’s was when SoftBank invested. So I’m not convinced wework is a worse investment than Uber which has absolutely no moats. Edit: Also, the strongest bull case for WeWork is basically that real estate is one of the largest industries in the planet (behind maybe energy). And how many global real estate brands exist? Almost none.