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"Among the possibilities they discussed was SoftBank serving as an anchor investor in the IPO by buying a significant portion of the roughly $3 billion to $4 bi

by whatok 7y ago

"Among the possibilities they discussed was SoftBank serving as an anchor investor in the IPO by buying a significant portion of the roughly $3 billion to $4 billion the company is expected to raise. They also discussed whether SoftBank might invest a chunk of money that would allow We to delay its IPO until 2020, people familiar with the conversations said." This is a real mess.

s_Hogg 7y ago
It's weird how the people who are best-informed here seem to be the latest to the party as far as that realisation goes. Why did they (by that I mean, We), even decide to kick the whole IPO process off? Surely they didn't need to do this now?
- maxerickson 7y ago
  They didn't anticipate the meddling kids. What I mean is, they thought they were going to get away with it.
  - cosmie 7y ago
    > They didn't anticipate the meddling kids. Nor their dumb dog![1] [1] The parent reference is to the catch line in Scooby Doo, for those that aren't familiar. And quite well fitting to the situation. https://youtu.be/mbXxgQLlF08 https://youtu.be/mbXxgQLlF08
    - deleted 7y ago
      [deleted]
    - Bizarro 7y ago
      Scrappy was the biggest meddler...always mucking up the works.
  - hn_throwaway_99 7y ago
    Yup, which to an outside observer is pretty shocking, given how grossly deficient the S1 is. Another commenter in a different thread posted this informative Jason Calacanis podcast about WeWork: https://thisweekinstartups.com/e969 https://thisweekinstartups.com/e969 One part that really resonated is when Calacanis is arguing that, once you become super rich, you need to rely on your authentic, pre-rich friends to give you candid advice (because after you become super rich, you can't really trust new friends when so many folks want a piece of your wealth). Calacanis' idea, which makes sense to me, is that Neumann didn't have a strong enough social base, so that he didn't have anyone candidly telling him stuff like "Umm, you know, this We trademark licensing deal is completely batshit insane and analysts will see this as a giant, bedazzled red flag" before he went ahead and did it. Insightfully, Calacanis predicted Neumann would walk back the licensing deal, and actually talks about Masayoshi Son being one of the only people that can give Neumann the harsh dose of reality he needs. I think this is all kind of a moot point, though. It's like WeWork jumped out of an airplane without a parachute and is now going "How do we fix this??" I'd put money down on some form of either (a) a restructuring or (b) essentially being taken over by the major lenders/investors as inevitable.
    - Danieru 7y ago
      Softbank cannot let either scenario S or B happen. Masatoshi-san needs the plates to stay in the air for his second fund to come together. He is a man who doubles down until broke. It is both what has made him so successful, and also why I do not buy softbank stock.
- tyre 7y ago
  I'm not sure what you mean by late to the party. They were the first ones at this party. WeWork has grown through the charisma of its CEO. Based on past performance, it has worked every time. They're on the extreme end of "startup realizes public markets will call them on their shit" but you can see why they'd be confident they could pull it off.
  - ineedasername 7y ago
    > "they're on the extreme end of..." Yes, and it caught up to them just a bit too soon for the IPO. Had the CEO been a little less brazen in his self-dealing, they might have pulled it off with more success.
- ineedasername 7y ago
  I think losing $1.9 billion on $1.8 billion in revenue in 2018 (yes, I know it's more complicated than that) has made getting additional capital more difficult. At the same time a self-dealing CEO gives the appearance to investors that he might not be confident that his normal compensation/stock will be worth that much, hence the extraction of value in other ways, leading to concerns about corporate governance that makes private capital more reluctant still. So the IPO is necessary to raise capital, not just to give early investors a soft exit. Now its catching up to them a bit too soon for a maximal IPO, so they're rethinking and perhaps a bit desperately (my interpretation only) going back for more private money.
- deleted 7y ago
  [deleted]
duxup 7y ago
What is SoftBank's angle here? With all the financial strangeness with WeWork and inside deals and etc I would think it doesn't look like a great investment anymore ... is SoftBank just "in too deep" and as far as they're concerned they have to double down?
- easytiger 7y ago
  My assumption has always been that they think over a long enough time scale their investments will become basic defacto infrastructure. Prob entirely wrong, but that's been how I've seen it
  - whatshisface 7y ago
    >their investments will become basic defacto infrastructure If their end goal is having the profit margins of an electric company, then these valuations are pretty hard to justify...
    - heavenlyblue 7y ago
      They could just invest early into a low-margin yet large piece of the pie that will grow into a multiple of itself. PS: not too fond of WeWork myself, but that's how I could see it.
- hyperpape 7y ago
  Patrick McKenzie (twitter.com/patio11) has been relaying some of the bull case, though I don't know whether he's endorsing it, or just relaying it. I don't have time to find his tweets right now, but they're in the past few weeks of his timeline. Basically: 1) if remote work continues to grow, they become an easy magnet because every company will pay for WeWork reimbursements more readily than some random local expenditure. 2) like AWS, they allow a big financial change: real estate moves from CapEx to OpEx, which is desirable for companies. Edit: one tweet https://twitter.com/patio11/status/1161796809741627392 https://twitter.com/patio11/status/1161796809741627392
  - 7y ago
Nokinside 7y ago
Interesting SoftBank fact: SoftBank accounts for half the outstanding Japanese corporate bonds. https://www.ft.com/content/24c4a8a8-7885-11e9-bbad-7c18c0ea0201 https://www.ft.com/content/24c4a8a8-7885-11e9-bbad-7c18c0ea0...
- whatok 7y ago
  They account for half of the bonds issued to retail investors which is significantly smaller than the overall corporate market. Half of all corporates makes little to no sense for anyone who has a cursory knowledge of this space.
deleted 7y ago
[deleted]
ackbar03 7y ago
I don't really know the vc game. Is this a bit desperate or is it just another day at the office for these guys? To me it sounds like they're really getting nervous

by whatok 7y ago

s_Hogg 7y ago

It's weird how the people who are best-informed here seem to be the latest to the party as far as that realisation goes. Why did they (by that I mean, We), even decide to kick the whole IPO process off? Surely they didn't need to do this now?

maxerickson 7y ago
They didn't anticipate the meddling kids. What I mean is, they thought they were going to get away with it.
- cosmie 7y ago
  > They didn't anticipate the meddling kids. Nor their dumb dog![1] [1] The parent reference is to the catch line in Scooby Doo, for those that aren't familiar. And quite well fitting to the situation. https://youtu.be/mbXxgQLlF08 https://youtu.be/mbXxgQLlF08
  - deleted 7y ago
    [deleted]
  - Bizarro 7y ago
    Scrappy was the biggest meddler...always mucking up the works.
- hn_throwaway_99 7y ago
  Yup, which to an outside observer is pretty shocking, given how grossly deficient the S1 is. Another commenter in a different thread posted this informative Jason Calacanis podcast about WeWork: https://thisweekinstartups.com/e969 https://thisweekinstartups.com/e969 One part that really resonated is when Calacanis is arguing that, once you become super rich, you need to rely on your authentic, pre-rich friends to give you candid advice (because after you become super rich, you can't really trust new friends when so many folks want a piece of your wealth). Calacanis' idea, which makes sense to me, is that Neumann didn't have a strong enough social base, so that he didn't have anyone candidly telling him stuff like "Umm, you know, this We trademark licensing deal is completely batshit insane and analysts will see this as a giant, bedazzled red flag" before he went ahead and did it. Insightfully, Calacanis predicted Neumann would walk back the licensing deal, and actually talks about Masayoshi Son being one of the only people that can give Neumann the harsh dose of reality he needs. I think this is all kind of a moot point, though. It's like WeWork jumped out of an airplane without a parachute and is now going "How do we fix this??" I'd put money down on some form of either (a) a restructuring or (b) essentially being taken over by the major lenders/investors as inevitable.
  - Danieru 7y ago
    Softbank cannot let either scenario S or B happen. Masatoshi-san needs the plates to stay in the air for his second fund to come together. He is a man who doubles down until broke. It is both what has made him so successful, and also why I do not buy softbank stock.
tyre 7y ago
I'm not sure what you mean by late to the party. They were the first ones at this party. WeWork has grown through the charisma of its CEO. Based on past performance, it has worked every time. They're on the extreme end of "startup realizes public markets will call them on their shit" but you can see why they'd be confident they could pull it off.
- ineedasername 7y ago
  > "they're on the extreme end of..." Yes, and it caught up to them just a bit too soon for the IPO. Had the CEO been a little less brazen in his self-dealing, they might have pulled it off with more success.
ineedasername 7y ago
I think losing $1.9 billion on $1.8 billion in revenue in 2018 (yes, I know it's more complicated than that) has made getting additional capital more difficult. At the same time a self-dealing CEO gives the appearance to investors that he might not be confident that his normal compensation/stock will be worth that much, hence the extraction of value in other ways, leading to concerns about corporate governance that makes private capital more reluctant still. So the IPO is necessary to raise capital, not just to give early investors a soft exit. Now its catching up to them a bit too soon for a maximal IPO, so they're rethinking and perhaps a bit desperately (my interpretation only) going back for more private money.
deleted 7y ago
[deleted]

duxup 7y ago

What is SoftBank's angle here? With all the financial strangeness with WeWork and inside deals and etc I would think it doesn't look like a great investment anymore ... is SoftBank just "in too deep" and as far as they're concerned they have to double down?

easytiger 7y ago
My assumption has always been that they think over a long enough time scale their investments will become basic defacto infrastructure. Prob entirely wrong, but that's been how I've seen it
- whatshisface 7y ago
  >their investments will become basic defacto infrastructure If their end goal is having the profit margins of an electric company, then these valuations are pretty hard to justify...
  - heavenlyblue 7y ago
    They could just invest early into a low-margin yet large piece of the pie that will grow into a multiple of itself. PS: not too fond of WeWork myself, but that's how I could see it.
hyperpape 7y ago
Patrick McKenzie (twitter.com/patio11) has been relaying some of the bull case, though I don't know whether he's endorsing it, or just relaying it. I don't have time to find his tweets right now, but they're in the past few weeks of his timeline. Basically: 1) if remote work continues to grow, they become an easy magnet because every company will pay for WeWork reimbursements more readily than some random local expenditure. 2) like AWS, they allow a big financial change: real estate moves from CapEx to OpEx, which is desirable for companies. Edit: one tweet https://twitter.com/patio11/status/1161796809741627392 https://twitter.com/patio11/status/1161796809741627392
- 7y ago

Nokinside 7y ago

Interesting SoftBank fact: SoftBank accounts for half the outstanding Japanese corporate bonds. https://www.ft.com/content/24c4a8a8-7885-11e9-bbad-7c18c0ea0201 https://www.ft.com/content/24c4a8a8-7885-11e9-bbad-7c18c0ea0...

whatok 7y ago
They account for half of the bonds issued to retail investors which is significantly smaller than the overall corporate market. Half of all corporates makes little to no sense for anyone who has a cursory knowledge of this space.

deleted 7y ago

[deleted]

ackbar03 7y ago

I don't really know the vc game. Is this a bit desperate or is it just another day at the office for these guys? To me it sounds like they're really getting nervous