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I know the feeling around WeWork's IPO is to poo all over it, but let's take a step back and remember that all valuations at this point at just reports. It was

I know the feeling around WeWork's IPO is to poo all over it, but let's take a step back and remember that all valuations at this point at just reports. It was reported that WeWork was going after 20B-30B, now it's reported they're going after 10B. When articles cite "sources" I'm pretty skeptical. Like all other IPOs, the bankers are going to price the stock based on what they think the market will buy. There's always intangibles that are difficult to evaluate, and maybe WeWork's IPO has more of those intangibles than usual, but I don't think we're outside of the realm of normalcy. Well, maybe we are in a massive tech bubble. I guess time will tell.

samnwa 7y ago
They recently raised funding at $47 billion though. So it's more than "just a report".
- mytailorisrich 7y ago
  Yes, Softbank invested at that valuation. That's their problem, really as that's a crazy valuation. For an IPO underwriters will look for a more reasonable number as they have to actually flog the shares to the market. If the IPO goes ahead at 10b valuation, Softbank will have to write off a massive amount and thus they are unsurprisingly fighting against it.
  - benj111 7y ago
    It may be a crazy valuation but it's legitimate, someone paid money at that valuation. House prices in X are crazy, but people will pay that, so that is a valuation. Yes eventually the buyers and sellers will have to balance out, starting from a price someone has actually paid seems entirely reasonable though. The IPO underwriters started off mentioning a $65bn valuation, most probably based on the $47bn previously paid.
    - mytailorisrich 7y ago
      One investor paid that price. That's the issue with illiquid assets that suddenly become liquid: What one person is willing to pay may not represent the market consensus. A house or a piece of art is a bit different because you always only need to find one buyer. But a company's shares traded on the open market are extremely liquid.
      - benj111 7y ago
        If I go to the stock exchange and buy one share of a company at double the going rate, then until another exchange occurs my price is the going price, and the 'value' of the company as doubled. I'm not saying its the answer, I personally find it unsatisfying, but it is an answer, and on some levels the only answer that matters.
        perl4ever 7y ago
        Why do you think your share determines the price of all the other shares? Is it special somehow? If nobody traded at all for a year, would that mean the company is worth zero, or that its worth is undefined?
        benj111 7y ago
        I have shares I havent traded in a while, if I go on to my account I will be shown the latest price along with a profit or loss. That latest price is based on what the last person actually paid, that's the only thing that makes it special. But don't forget that theres 2 sides to the market, it's the last price someone agreed to sell at, because that's what we are talking about, the crossover where buyers match sellers. Now if I decided to sell my shares based on that, would I be guaranteed to also get that price? No, there could be a flash crash, there could be results just announced, there could be any number of reasons to make the stock go up or down, or more precisely attract or scare away investors. In general though I would expect to get a figure close to the price that I saw, because theres not much that can fundamentally change in the few minutes between trades. On a stock that hasn't been traded in a year, the only thing that really changes is the error bar, the price isn't going to be within 0.1% of the last one, it's going to be within 100% or something. Having someone actually pay money for something really is the acid test. I can slap a price tag on something, but if no one buys it than is it really worth that? We can sit around coming to more or less reasonable valuations, but ultimately if Wework floats and trades at $100bn valuation, then no amount of armchair opinioneering is going to change that, people are putting their money where their mouth is, and as I seem to mention on every stock market thread, the best thing about the stock market is you can put your money where your mouth is.
    - femto113 7y ago
      Valuations based on investments that have liquidation preference are meaningless. It's analogous to me offering to give you $100K to own 1% of your house, but only if am also guaranteed the first $200K out of any sale. In some sense perhaps I just valued your house at $10 million, but in my perspective I just bought in at half-off the actual market value. I can still lose money if the house sells for less than $100K, but I could still be perfectly happy with my investment even if it sold for a 1/50 of the "valuation".
      - benj111 7y ago
        Right, but that liquidation preference would be junior to all other liquidation preferences, and they've already raised over $12bn, its also junior to debt, and they were seeking to raise $6bn as part of this floatation, plus whatever other debt they have. So quite clearly given that liquidation preference is now potentially worthless, they do need to base their valuation on some kind of reality.
john_moscow 7y ago
Those reports are used to gauge the public opinion. You "leak" that the valuation is going to be $XYZ and then watch the public comments, news reports et al to estimate how willing will the public be to buy in at this price.
- JMTQp8lwXL 7y ago
  Do you do a follow-up Twitter sentiment analysis, or do you really only care about the banker's commentary? Anyone on here, or CNBC, or Cramer's show is just the peanut gallery. We aren't the market makers.
JMTQp8lwXL 7y ago
If there are more intangibles than tangibles, there is more unknown than known, and it should be priced accordingly (e.g., lower).
- finkin1 7y ago
  You're probably right, which appears to be what's happening. In the end I think the market will decide what's low enough. I'm very curious to see what happens to the stock if/when it starts trading.
  - JMTQp8lwXL 7y ago
    Given all the negative public sentiment, my guess is the will work extra hard to get price discovery just right so it won't much at all on IPO day. As we're seeing, that likely means a significant decrease from We's most recent valuation.
pgwhalen 7y ago
The “reports” are just the bankers putting out offers essentially, and seeing how the (investing) public reacts. So on the one hand, they’re extremely real because they’re from the people who will eventually set the price, but on the other hand they’re extremely fake since not necessarily anyone has expressed an interest to transact at that price.

samnwa 7y ago

They recently raised funding at $47 billion though. So it's more than "just a report".

mytailorisrich 7y ago
Yes, Softbank invested at that valuation. That's their problem, really as that's a crazy valuation. For an IPO underwriters will look for a more reasonable number as they have to actually flog the shares to the market. If the IPO goes ahead at 10b valuation, Softbank will have to write off a massive amount and thus they are unsurprisingly fighting against it.
- benj111 7y ago
  It may be a crazy valuation but it's legitimate, someone paid money at that valuation. House prices in X are crazy, but people will pay that, so that is a valuation. Yes eventually the buyers and sellers will have to balance out, starting from a price someone has actually paid seems entirely reasonable though. The IPO underwriters started off mentioning a $65bn valuation, most probably based on the $47bn previously paid.
  - mytailorisrich 7y ago
    One investor paid that price. That's the issue with illiquid assets that suddenly become liquid: What one person is willing to pay may not represent the market consensus. A house or a piece of art is a bit different because you always only need to find one buyer. But a company's shares traded on the open market are extremely liquid.
    - benj111 7y ago
      If I go to the stock exchange and buy one share of a company at double the going rate, then until another exchange occurs my price is the going price, and the 'value' of the company as doubled. I'm not saying its the answer, I personally find it unsatisfying, but it is an answer, and on some levels the only answer that matters.
      - perl4ever 7y ago
        Why do you think your share determines the price of all the other shares? Is it special somehow? If nobody traded at all for a year, would that mean the company is worth zero, or that its worth is undefined?
        benj111 7y ago
        I have shares I havent traded in a while, if I go on to my account I will be shown the latest price along with a profit or loss. That latest price is based on what the last person actually paid, that's the only thing that makes it special. But don't forget that theres 2 sides to the market, it's the last price someone agreed to sell at, because that's what we are talking about, the crossover where buyers match sellers. Now if I decided to sell my shares based on that, would I be guaranteed to also get that price? No, there could be a flash crash, there could be results just announced, there could be any number of reasons to make the stock go up or down, or more precisely attract or scare away investors. In general though I would expect to get a figure close to the price that I saw, because theres not much that can fundamentally change in the few minutes between trades. On a stock that hasn't been traded in a year, the only thing that really changes is the error bar, the price isn't going to be within 0.1% of the last one, it's going to be within 100% or something. Having someone actually pay money for something really is the acid test. I can slap a price tag on something, but if no one buys it than is it really worth that? We can sit around coming to more or less reasonable valuations, but ultimately if Wework floats and trades at $100bn valuation, then no amount of armchair opinioneering is going to change that, people are putting their money where their mouth is, and as I seem to mention on every stock market thread, the best thing about the stock market is you can put your money where your mouth is.
  - femto113 7y ago
    Valuations based on investments that have liquidation preference are meaningless. It's analogous to me offering to give you $100K to own 1% of your house, but only if am also guaranteed the first $200K out of any sale. In some sense perhaps I just valued your house at $10 million, but in my perspective I just bought in at half-off the actual market value. I can still lose money if the house sells for less than $100K, but I could still be perfectly happy with my investment even if it sold for a 1/50 of the "valuation".
    - benj111 7y ago
      Right, but that liquidation preference would be junior to all other liquidation preferences, and they've already raised over $12bn, its also junior to debt, and they were seeking to raise $6bn as part of this floatation, plus whatever other debt they have. So quite clearly given that liquidation preference is now potentially worthless, they do need to base their valuation on some kind of reality.

john_moscow 7y ago

Those reports are used to gauge the public opinion. You "leak" that the valuation is going to be $XYZ and then watch the public comments, news reports et al to estimate how willing will the public be to buy in at this price.

JMTQp8lwXL 7y ago
Do you do a follow-up Twitter sentiment analysis, or do you really only care about the banker's commentary? Anyone on here, or CNBC, or Cramer's show is just the peanut gallery. We aren't the market makers.

JMTQp8lwXL 7y ago

If there are more intangibles than tangibles, there is more unknown than known, and it should be priced accordingly (e.g., lower).

finkin1 7y ago
You're probably right, which appears to be what's happening. In the end I think the market will decide what's low enough. I'm very curious to see what happens to the stock if/when it starts trading.
- JMTQp8lwXL 7y ago
  Given all the negative public sentiment, my guess is the will work extra hard to get price discovery just right so it won't much at all on IPO day. As we're seeing, that likely means a significant decrease from We's most recent valuation.

pgwhalen 7y ago

The “reports” are just the bankers putting out offers essentially, and seeing how the (investing) public reacts. So on the one hand, they’re extremely real because they’re from the people who will eventually set the price, but on the other hand they’re extremely fake since not necessarily anyone has expressed an interest to transact at that price.