6 ms·

WeWork IPO filing shows it's losing nearly $5,200 per customer

41 points by yesplorer 7y ago

groundlogic 7y ago
This is an insane IPO. (Insane in a pretty bad way.)
- 420codebro 7y ago
  Not for the founder - heh.
not_a_cop75 7y ago
Such bleeding is not atypical for startups, if you've done any reading.
- JamesAdir 7y ago
  Startups have technology that can win the market or scale easily. This is a real estate business, not a tech startup.
rdlecler1 7y ago
>The losses for each WeWork member -- about $5,200 per customer -- are about 28 times what Uber loses per active rider. What is the value of those customers though? $3500-$12,000/year. And as I understand the business model, it is really a realestate business so how of the value is in asset appreciation. If you’re buying real estate at pennies on the dollar and using cash flow to pay off debt, then $1.3B in losses may not be a big deal since you really need to look at LTV. If I put down $200k for a house in SF and take on debt for the rest then I am loosing a hell of a lot more money per occupant.
- Areading314 7y ago
  Yes, in addition to having a fake (never-profitable) business, they are also exposed to highly overvalued real estate at the top of a business cycle
  - JMTQp8lwXL 7y ago
    To be fair, if this was the start of the business cycle, it might not be a bad idea. Real estate had some great deals to be found in 2008 if you had the liquidity to purchase.
    - jmole 7y ago
      that's exactly what mcdonalds did: https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-beyond-the-burger/ https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-bey...
      - Areading314 7y ago
        With the minor difference that Mcdonalds has been making $billions in profit, quarter after quarter for many decades.
- lerchmo 7y ago
  as far as I know they buy 15 year leases...
- tyingq 7y ago
  WeWork, in most cases, doesn't own the property. They are subletting.
- mindentropy 7y ago
  Is this how they avoid paying huge taxes to the Government by taking on additional debt?
xs83 7y ago
I'm unsure how - We were at WeWork for a couple of years and whilst the overally experience was fantastic we were paying probably a 10% premium in Australia for an office 20% of the size we could have got elsewhere. I think the experience is generally worth the downsize - but if you need any kind of space - WeWork just isn't for you!
glaive123 7y ago
This metric is meaningless when a company is expanding as fast as WeWork is and investing heavily in setting up new spaces. The real metric that matters is average payback period per property as a factor of the total rent liability. The risk is WeWork's average payback period is never or they don't have enough cash to reach their payback period.
timoth3y 7y ago
> The losses for each WeWork member — about $5,200 per customer — are about 28 times what Uber loses per active rider. Why do so many articles compare WeWork and Uber per-customer losses? It's absurd on the face of it. Per customer profit/loss comparisons only make sense when per-customer revenues (or at least lifetime value) are similar. A WeWork customer might be renting a small office for a year and worth >$25,000 in annual revenue. An uber customer might be worth maybe 1% that. It would be better to compare WeWork per-customer revenues to companies like Regus or ServeCorp with whom they are actually competing.

41 points by yesplorer 7y ago

groundlogic 7y ago

This is an insane IPO. (Insane in a pretty bad way.)

420codebro 7y ago
Not for the founder - heh.

not_a_cop75 7y ago

Such bleeding is not atypical for startups, if you've done any reading.

JamesAdir 7y ago
Startups have technology that can win the market or scale easily. This is a real estate business, not a tech startup.

rdlecler1 7y ago

>The losses for each WeWork member -- about $5,200 per customer -- are about 28 times what Uber loses per active rider. What is the value of those customers though? $3500-$12,000/year. And as I understand the business model, it is really a realestate business so how of the value is in asset appreciation. If you’re buying real estate at pennies on the dollar and using cash flow to pay off debt, then $1.3B in losses may not be a big deal since you really need to look at LTV. If I put down $200k for a house in SF and take on debt for the rest then I am loosing a hell of a lot more money per occupant.

Areading314 7y ago
Yes, in addition to having a fake (never-profitable) business, they are also exposed to highly overvalued real estate at the top of a business cycle
- JMTQp8lwXL 7y ago
  To be fair, if this was the start of the business cycle, it might not be a bad idea. Real estate had some great deals to be found in 2008 if you had the liquidity to purchase.
  - jmole 7y ago
    that's exactly what mcdonalds did: https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-beyond-the-burger/ https://blog.wallstreetsurvivor.com/2015/10/08/mcdonalds-bey...
    - Areading314 7y ago
      With the minor difference that Mcdonalds has been making $billions in profit, quarter after quarter for many decades.
lerchmo 7y ago
as far as I know they buy 15 year leases...
tyingq 7y ago
WeWork, in most cases, doesn't own the property. They are subletting.
mindentropy 7y ago
Is this how they avoid paying huge taxes to the Government by taking on additional debt?

xs83 7y ago

I'm unsure how - We were at WeWork for a couple of years and whilst the overally experience was fantastic we were paying probably a 10% premium in Australia for an office 20% of the size we could have got elsewhere. I think the experience is generally worth the downsize - but if you need any kind of space - WeWork just isn't for you!

glaive123 7y ago

This metric is meaningless when a company is expanding as fast as WeWork is and investing heavily in setting up new spaces. The real metric that matters is average payback period per property as a factor of the total rent liability. The risk is WeWork's average payback period is never or they don't have enough cash to reach their payback period.

timoth3y 7y ago

> The losses for each WeWork member — about $5,200 per customer — are about 28 times what Uber loses per active rider. Why do so many articles compare WeWork and Uber per-customer losses? It's absurd on the face of it. Per customer profit/loss comparisons only make sense when per-customer revenues (or at least lifetime value) are similar. A WeWork customer might be renting a small office for a year and worth >$25,000 in annual revenue. An uber customer might be worth maybe 1% that. It would be better to compare WeWork per-customer revenues to companies like Regus or ServeCorp with whom they are actually competing.