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Troubles Mount for the We Company as Softbank Reportedly Calls for Shelving IPO
- ngngngng 7y agoThis was going to be my first short, shame.
- hdpq 7y agoif you could get your hands on the stock, which would have been fairly unlikely.
- buttcoinslol 7y agoYou can create a synthetic short with options, no need to borrow any stock at all.
- mrfredward 7y agoWith so many people wanting to bet against it though, those put options would end up mighty expensive.
- prepend 7y agoThat’s the whole point. Shorting at the right time is similar to buying puts while still compatible with your model.
- rwmurrayVT 7y agoNot only do you have to pick the right price direction, you have to pick the right timing and have it exceed the markets overall expectation. Even with a short of shares you have to manage to find a lender and beat the cost to borrow them.
- reilly3000 7y agoBuying that stock would be akin to donating to a "Help Adam Neumann Buy Real Estate" GoFundMe campaign.
- disillusioned 7y agoHe at least had the good sense to "allow" them to use "his" WE trademark without having to pay the $15M annual fee anymore!
- benj111 7y agoWas it an annual fee? Its seems like it was a 1 off payment of 'only' $5.9 million https://www.businessinsider.com/wework-ceo-gives-back-millions-from-we-trademark-after-criticism-2019-9?r=US&IR=T https://www.businessinsider.com/wework-ceo-gives-back-millio...
- v77 7y agoBloomberg mentioned that Neumann probably cost himself tens, if not hundreds, of millions of dollars because of the huge negative impact of that clause, given that most of his wealth is tied up in WeWork stock. And then he ended up cancelling the deal anyways.
- ynniv 7y agoWeFunder
- roland35 7y agoMaybe he calls it "WeToMe"?
- TheOtherHobbes 7y agoOr just "Me" for short.
- lapnitnelav 7y ago
- jbob2000 7y agoWe're going to look back on this company and say to ourselves "why did we fund a company to sign rental agreements". I jest, but WeWork is one of those strange entities that's greater than the sum of its parts. If the magic goes or the brand tarnishes a little, then the whole thing goes poof.
- mschuster91 7y ago> We're going to look back on this company and say to ourselves "why did we fund a company to sign rental agreements". Because there is just too much dumb money floating around and waiting to be invested after a decade of QE monetary policy. But instead of governments (worldwide) using said dumb money to invest in their future e.g. by building (or even maintaining!) infrastructure, teaching young students, fixing up environmental issues or helping people rebuild their savings/retirement, the money is forced into such "investments". Next recession is gonna hit hard.
- lotsofpulp 7y agoAll of the options you listed would result in wealth redistribution. Asset value inflation and collecting rent are how you maintain or increase the wealth/income gap, not giving away your money to make other people’s lives better/productive.
- jakobegger 7y agoYes, it'll make investors richer, but they'll end up in a world that nobody likes to live in.
- kasey_junk 7y agoWeWork is offering its customers something of value, that while not unique, was rare. That it has to do largely with changing the normal contracts in their industry doesn’t matter much. The issue is not with what they are selling it’s with how they are funding it. I think this story says a lot less about We than it does about SoftBank.
- 19ylram49 7y agoIt’s been quite hilarious for me watching this saga unfold. All I needed to hear was that this man literally took out loans from WeWork and used the proceeds of the loans to purchase real estate that he then leased back to WeWork. Lol!
- DrAwdeOccarim 7y agoAnd sold the rights to 'We' for like $5mil in stock...to the company he founded. Matt Levine has had a great time ripping him apart for this.
- rwmurrayVT 7y agoMatt Levine once (or twice..) ripped me apart :(
- alexhutcheson 7y agoLink?
- rwmurrayVT 7y agohttps://www.bloomberg.com/opinion/articles/2018-07-12/a-speed-race-for-soybeans https://www.bloomberg.com/opinion/articles/2018-07-12/a-spee...
- Lazare 7y agoWow, you're the guy who ran the fake tender offer for Fitbit, made $3k, and went to prison? Ouch. :)
- rwmurrayVT 7y agoWell, most of that is accurate. Also forfeiture doesn't account for the fact that you may have paid capital gains tax. I feel like they really shafted me on that one.
- wastedhours 7y agoWe must be pretty important for Softbank as a signal - even if they didn't believe in the company, allowing such a major investment take such a big hit would be rather bad. Worth them pouring a few $bn more in instead of an IPO, if only to shore up faith in the rest of their portfolio? All that being said, someone needs to be mentoring the CEO, like right now. That S1 was... not... great.
- nindalf 7y agoNot a fan of "Community adjusted" EBITDA I take it?
- wastedhours 7y agoThey win my respect for their confidence in trying, but they don't win my money!
- Braighni 7y agoSoftbank invested at a $47 billion valuation. An IPO at $20bn, that may tank afterwards, would really hurt their paper profits.
- _flwm 7y agoThe risk may be more existential for Softbank than just knocking profits -- coming after Uber
- goatinaboat 7y agoSoftBank business model: make an investment at valuation X. Make another investment at valuation 2X. Declare that the value of the first investment has doubled! The wheels come off when anyone else gets to value the investment. That’s happening now. I wonder how other SoftBank businesses like ARM will be impacted.
- onion2k 7y agoI wonder how other SoftBank businesses like ARM will be impacted. I don't think many investors dispute the ~$28b valuation that Softbank paid for ARM.
- nemo44x 7y agoEvidence we are not in a bubble and that markets are mostly sane currently.
- ruperp 7y agoEvidence against?
- nemo44x 7y agoA bubbly, insane market would jump on this "before it's too late!". What we are seeing here is a market reaction that says "we reject your insane valuation, cut it in half.".
- JohnJamesRambo 7y agoInteresting viewpoint. I took this news as confirmation that we are entering a recession and people won’t pay for just garbage and a dream anymore. Euphoria is waning and reality is setting in on the boom bust cycle.
- dboreham 7y agoI came here to post the opposite: cancellation of frothy IPOs is a good sign of a coming downturn, isn't it?
- mikestew 7y agoThe market currently appears to be saying, “ya know, if we were in a bubble, I might buy your stinky shit. But because we’re not in a bubble, and I have no great FOMO, I’m going to take a pass on your stinky turd of an IPO.” Another way of looking at it, anyway. I have no insight one way or the other.
- r00fus 7y agoThat's because WeWork is obviously bad. But what about other, not so obvious bad-bets?
- 7y ago
- t0astbread 7y agoSo is this company's business just selling baseless promises to investors? If yes, how did they bootstrap this?
- kgc 7y agoYou may have answered your own question.
- t0astbread 7y agoYeah but I can't just go to an investor and say "we rent out offices" (in a fancy way) "but we're worth billions" and actually get billions... or can I?
- beager 7y agoNot with that attitude, you can't.
- tomp 7y agoI know most HN readers look down upon the site, but I really like Zero Hedge's take on this. https://www.zerohedge.com/news/2019-09-09/2-letters-20-billion-lost https://www.zerohedge.com/news/2019-09-09/2-letters-20-billi... > Super-voting stock – Zuck did that and it worked out in the end > Accelerating losses – Look at all that revenue growth > Zero possibility of profits – Hasn’t mattered for years > Convoluted insider dealings on property leases – Property GPs always double dip somehow > Sold the pronoun “WE” to the company – That man is a crook!!
- rolltiide 7y agoZerohedge is entertaining, I always look for the sources in the articles I find interesting, so I can sometimes just read those instead or cite those. ZH's formulaic way of writing sensational bearish pieces gets a little tiresome after you notice it (posted submitted by guest readers like this one don't follow this format): Intro about main point Background on main point Quote from the source about the main point, repeating the background section but in italics Controversial next point, with a bolded section Quote from the source about the controversial next point, repeating the exact prior section, but in italics Tweets Two line conclusion, with a finance pun. I try to just read Bloomberg or Wall Street Journal directly. But Zerohedge's decade long bear market porn is so entertaining. They used to have credit market specialists writing, but it seems they don't stick around for long.
- raverbashing 7y agoMaybe Adam should expand his ventures to the business of overhyped music festivals for the tech crowd, they could call it WeBurn or something. Not that anything like that ever had major problems But on the topic, ZH is good some 20% of the time, the other 80% is just packaged talking points on "long big recession" (I mean that's actually the motto they follow), EUphobia and some amount of Russianphilia
- stanfordkid 7y agoZeroHedge is the type of site that will quickly be labelled alt-right, fake news etc. in reality they tend to just interpret events in much more extreme ways but still rely on largely factual sources. I find the commentary to be much more thought provoking than consensus outlets. Glad to see some fellow HN'ers peruse the site.
- roland35 7y agoI think at this point it would be surprising if there was GOOD news about We! It just seems to be one thing after another.
- buboard 7y agowell this is good news?
- ht85 7y agoTangential, but does anyone else find techcrunch UX absolutely dreadful on desktop?
- Braighni 7y agoAgreed. Very untidy to my eyes. I'm not a fan of the moving ad bar at the top, or the progress tracker thing either.
- bertil 7y agoI use uBlock Origin aggressively and I see it as necessary for TechCrunch.
- inetknght 7y agoI just prepend `about:reader?url=` to any TechCrunch URL and never have to deal with their dreadful UI
- save_ferris 7y agoCorporate governance for startups is such a joke sometimes, it’s unbelievable. And investors bring it upon themselves. You want sustained hockey stick growth, regardless of the cost to the team and the business, no matter what? Then you’re gonna find some founders that are much better at making the business look promising by hitting certain metrics than actually building a solid operational foundation for the business.
- nickpinkston 7y agoThough this happened at GE too over a long time with a traditional corp gov structure. I'm blanking on the tech company [1] that recently gave into the pro-traditional corp gov people and gave up their super-voting shares, only for Wall St. to start screwing them and the long-term of the company, which was reported as a blow for the pro-trad corp gov people. It's a hard call, but I think I'm still for close control by the founders. Sure Elon might've promised too much and pushed Tesla too far, but if they put in a former auto exec I suspect the company wouldn't be as far along as it is. The SolarCity acquisition OTOH seems like Elon taking a bonus for himself and having the power (via his votes, but also who he is for the company / execution) to make the board go along with it. I suspect Neumann's investors are in too deep to challenge his craziness (sound like anyone else?) but the market rightly smells bullshit. [1] I heard about it on Pro Rata the other day.
- paulddraper 7y ago> And investors bring it upon themselves. Of course. Yes you have the occasional bad apple, but so what? You're a VC...you have 10 bad apples for every 1 good one. The calculus is in favor of pouring gas on a promising bet, even if it increases the risk of explosion.
- deleted 7y ago[deleted]
- stewy85 7y agoI fail to see how this company could survive a recession. The first thing companies do during a recession is reduce their headcount. Less headcount means less desks required.
- parenthesis 7y agoYes, it's a highly levered play on the mostly cyclical portion of a cyclical market.
- navigatesol 7y agoWhat is insane is that they are the biggest commercial real estate tenant in some of the biggest cities in America (and London).
- myalphabet 7y agoThis is my biggest concern. Regardless of if WeWork can 'survive' a recession, my fear is that they could easily cause a recession. If WeWork starts to go under, it could cause a real estate market collapse in some of the world's largest cities.
- generatorguy 7y agoI wonder which REITs have the most we exposure?
- jeltz 7y agoMany of their competitors have survived recessions just fine. You just have to either be diversified or have enough cash reserves. The issue is mostly that WeWork has too high costs and a too high valuation.
- generatorguy 7y agoTheir competitors have long term leases with the tenants that we doesn’t have.
- 7y ago
- dreamcompiler 7y agoIt only took 19 years, but we finally have the next pets.com. What will we call this era? Dotcom Bubble II?
- bognition 7y agoexcept WeWork has absolutely nothing to do with being a tech company
- dreamcompiler 7y agoExactly. Neither did pets.com.
- delfinom 7y agoThey got invested into by the same investors all the same. It's the only reason why they are being thrown into the mix of "tech companies" and what puts the rest of the tech bubble in trouble. SoftBank themselves are a hilarious joke. Over half of corporate debt in Japan....is held by SoftBank.
- patthebunny 7y agoWhich for some reason finally matters.
- JaimeThompson 7y agoNot sure how much one can trust a site that thinks nuclear weapons aren't real. https://www.zerohedge.com/news/2016-08-06/atom-bomb-anniversary-youre-being-lied-about-hiroshima-and-much-more https://www.zerohedge.com/news/2016-08-06/atom-bomb-annivers... "The attacks on Hiroshima and Nagasaki were horrible and tragic. But whether they were results of “atom” bombs (certainly in the sense that people understand them today) is at least seriously questionable."
- hodgesrm 7y agoWow, that's a disturbing read. Thanks for posting.
- inflatableDodo 7y agoI like the random numerology, really adds weight to the argument: >We’ve reported that a squadron of 66 bombers were launched on August 6th (666) to bomb the municipality of Imabari, even though Imabari. had been bombed already, twice. >This bombing squadron may well have fire-bombed Hiroshima instead, as Hiroshima was not far away. According to early surviving versions of Revelations, the number of the beast is actually 616 - https://web.archive.org/web/20080110172555/http://news.nationalgeographic.com/news/2005/04/0425_050425_papyrus_2.html https://web.archive.org/web/20080110172555/http://news.natio... - however this revelation doesn't appear to have filtered through to the conspiratoraly minded as of yet.
- jazzyjackson 7y ago666 is Gematria numerology applied to Nero’s name in Greek, 616 is what you get with the Latin spelling, it’s more of a confirmation than a contradiction
- inflatableDodo 7y agoGiven Nero was Roman, his name will presumably be from the Latin. If the Greek version of the spelling differs, then 666 surely must be in error. Unless they meant that the number of the beast is Nero's name when you attempt to write it in Greek, though that seems something of a stretch, even for numerology afficionados.
- YeahSureWhyNot 7y agofun times ahead
- patthebunny 7y agoI don't think they go public until they sort out the financials and get rid of the stench of blatant corruption.
- tempsy 7y agoI'm looking through some other SoftBank investments. My guess is that Brandless, Wag (dog walking), Clutter (moving), and DoorDash are all in similar positions of having raised too much money.
- navigatesol 7y ago>I'm looking through some other SoftBank investments Uber as well, although it actually has a solid brand and a useful product. However, the fund is underwater on their investment too, which adds pressure.
- mrnobody_67 7y agoCorrect. Brandless even fired their CEO back in March of this year. Wag founds are off doing a mobility startup, got kicked out as well.
- Traster 7y agoI've got to say I think this is a really bearish sign for Softbank. Softbank is meant to be so big that it can pick winners and buy shares of entire markets so they can own the future returns of all these tech companies. One of the big advantages of Softbank was meant to be that if you have softbank money you are going to win through capital spend and expansion. But the fact that Softbank can't walk away from We seems to indicate that they actually are a lot more sensitive to the market than they claim to be. It really changes the dynamic if Softbank can't afford to hold all these companies when the next recession comes. You don't want to be a Softbank owned company during that fire sale.
- perl4ever 7y agoThis seems vaguely like a martingale betting system.
- deleted 7y ago[deleted]
- edmoffo 7y agoIt's so sad to see it all happening, after we all have been celebrating their success ...