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Well, corporate governance was one of the main factors why the market refused to accept anything close to their last private valuation, so this makes sense. Not

Well, corporate governance was one of the main factors why the market refused to accept anything close to their last private valuation, so this makes sense. Note that they desperately need the public money before the end of December in order to avoid running out of cash [0]. My bet is that they will now try to remarket We as a shareholder-controlled company, will maybe even eliminate the multi-class stock structure in order to get included into the passive funds. I am still not sure they will ever become profitable through. The only way to disrupt the incumbents in an established market like this one would be to spot a new opportunity in the market and capitalize on it faster than the slow 30-year-old companies like Regus. Except the only market opportunity We has successfully exploited by now are the desperate investors ready to shove billions in your hands if you pretend to be a cool techy thing they don't fully understand. [0] https://www.reuters.com/article/wework-loan/clock-ticking-down-on-weworks-us6bn-loan-after-ipo-delayed-idUSL2N26A0VF https://www.reuters.com/article/wework-loan/clock-ticking-do...

rwmurrayVT 7y ago
I just don't see them wrestling control away from the deranged, cult leader. He truly believes he is destined to be president of the world and revolutionize.. well every thing. There best bet would be to drop the multi-class structure to get into passive funds. It needs $8.1b market cap to get into S&P500.
- 0xB31B1B 7y ago
  It also needs to be ebita profitable for 8 quarters in a row before its added to the index IIRC
  - rwmurrayVT 7y ago
    I think it's most recent quarter + 4 previous. I'm also fairly certain it's selected by committee. I'm no finance expert, hence the securities fraud conviction. I don't really know which index it could get into with a high amount of passive investment.
- YPCrumble 7y ago
  Is this part of the business model of these large, unprofitable VC-backed companies? Build a valuation to meet the 8.1bn threshold, then sell the shares to passive investors in S&P 500 index funds?
  - deleted 7y ago
    [deleted]
  - hef19898 7y ago
    And for VC's to build a story and evaluation interesting enough for SoftBank to buy in? Because it sometimes seems like it...
  - mruts 7y ago
    No. The S&P 500 is selected by committe. And it's 6.1bn, not 8.1bn. Mabye that's the plan for the Russell 3000, though. But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.
    - kgwgk 7y ago
      > But it doesn't really matter except when the stock gets added to the index It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
    - rwmurrayVT 7y ago
      Not true. [0] >...Unadjusted company market capitalizations of US$8.2 billion or more for the S&P 500..... are required. [0] https://us.spindices.com/documents/methodologies/methodology-sp-us-indices.pdf https://us.spindices.com/documents/methodologies/methodology...
- john_moscow 7y ago
  >He truly believes he is destined to be president of the world and revolutionize. I am not sure. He has been pretty methodical in siphoning the money out of the company (privately leasing the real estate to We, charging them for the trademark, etc), so he probably knows very well what he is doing. Somehow, if you act this way, investors will perceive you as a charismatic and energetic leader and buy in even if your business model doesn't make much sense. IIRC, similar happened to Juicero, albeit on a much smaller scale: countless talks about expanding consciousness, changing the world, raw water bollocks, a completely unsustainable business model and questionable transactions to some external consultants.
  - dbuder 7y ago
    Please point me to where I can read more about the Juicero story, particularly the external consultants. It was just so comically bad on every level, it made me lose alot of respect for VCs.
DebtDeflation 7y ago
There was an article yesterday where Softbank was saying that they think they can renegotiate those LOCs to go forward even if there is no IPO this year. They might end up being a lot smaller and have worse terms for We though. I wouldn't be surprised if pushing Adam out was the first demand the banks made in that renegotiation. Softbank wants to delay the IPO now because it would mean a massive writedown of their investment value.
- justincormack 7y ago
  I think it is clear they have to write it down anyway in any reasonable accounting.
- moltensodium 7y ago
  Adam seems to be the scapegoat, somewhat justified of course, but the bigger problem of this company being an obvious scam with no way to make money has not been addressed.
joshcain 7y ago
Corporate governance was definitely a factor, but getting cut down from $47B to $10-15B is... a lot. Public market investors clearly have a much worse opinion of We's fundamentals than SoftBank did.
- MiroF 7y ago
  Yeah - these institutional investors have a lot riding on "the market was responding to weworks governance structure" and I don't think that is really representative of the facts.
  - mason55 7y ago
    I mean, it likely doesn't hurt anything. I'm sure the underwriters (JPM etc.) have spoken to their institutional clients and no one has said "getting rid of Adam will make my valuation go down." So you get rid of Adam (and his supermajority voting rights) have some quiet conversations about how people value the company now. Then you decide if you're willing to take whatever haircut the market is offering from the last private round. If We is to be believed the other option is to halt all expansion. They claim that mature locations are cash flow positive. If that's true then you don't necessarily need to take a haircut, you just stop expanding, prove to the market that you actually do have a business, and then either start siphoning off the cash or try to IPO again.
- braythwayt 7y ago
  You are presuming that SOftBank believed in the fundamentals, and not in the proposition that if you carefully stage a series of cash injections at increasing valuations, the charismatic founder's PR halo will impart a shine onto the company's shares.
  - ineedasername 7y ago
    In which case, the major failing of We was that it did not go public fast enough. I wonder if we'll see this translate into time pressure for future startups to go public a little earlier before the bloom is off the rose.
egdod 7y ago
> corporate governance was one of the main factors why the market refused to accept anything close to their last private valuation That’s not at all clear.
rootusrootus 7y ago
> slow 30-year-old companies like Regus Unless I am completely misunderstanding the value of WeWork, this ship seems to have already sailed. At least locally, Regus has offerings that are substantially the same in price and features to what WeWork has.
- october_sky 7y ago
  Also, smaller, regional real estate companies are doing this (generic co-working spaces) with empty office space, often on the ground floor. I visited a startup at one such location and was impressed with it. It's a strategy to capitalize on unused assets.

rwmurrayVT 7y ago

I just don't see them wrestling control away from the deranged, cult leader. He truly believes he is destined to be president of the world and revolutionize.. well every thing. There best bet would be to drop the multi-class structure to get into passive funds. It needs $8.1b market cap to get into S&P500.

0xB31B1B 7y ago
It also needs to be ebita profitable for 8 quarters in a row before its added to the index IIRC
- rwmurrayVT 7y ago
  I think it's most recent quarter + 4 previous. I'm also fairly certain it's selected by committee. I'm no finance expert, hence the securities fraud conviction. I don't really know which index it could get into with a high amount of passive investment.
YPCrumble 7y ago
Is this part of the business model of these large, unprofitable VC-backed companies? Build a valuation to meet the 8.1bn threshold, then sell the shares to passive investors in S&P 500 index funds?
- deleted 7y ago
  [deleted]
- hef19898 7y ago
  And for VC's to build a story and evaluation interesting enough for SoftBank to buy in? Because it sometimes seems like it...
- mruts 7y ago
  No. The S&P 500 is selected by committe. And it's 6.1bn, not 8.1bn. Mabye that's the plan for the Russell 3000, though. But it doesn't really matter except when the stock gets added to the index. The index funds and ETFs are going to rebalance their positions based on market cap and will not affect the price. These funds could affect the volatility though, since it's conceivable that with a lot of the shares locked up, these stocks are going to be more thinly traded than they would have otherwise been. This could create price instability, though I'm not sure there's any proof that it's true.
  - kgwgk 7y ago
    > But it doesn't really matter except when the stock gets added to the index It does matter when there are inflows, if there is new money coming into index funds all the stocks in the index benefit (they funds also sell all the stocks in the index when there are outflows). Non-indexed stock are less coupled to flows in and out of trackers.
  - rwmurrayVT 7y ago
    Not true. [0] >...Unadjusted company market capitalizations of US$8.2 billion or more for the S&P 500..... are required. [0] https://us.spindices.com/documents/methodologies/methodology-sp-us-indices.pdf https://us.spindices.com/documents/methodologies/methodology...
john_moscow 7y ago
>He truly believes he is destined to be president of the world and revolutionize. I am not sure. He has been pretty methodical in siphoning the money out of the company (privately leasing the real estate to We, charging them for the trademark, etc), so he probably knows very well what he is doing. Somehow, if you act this way, investors will perceive you as a charismatic and energetic leader and buy in even if your business model doesn't make much sense. IIRC, similar happened to Juicero, albeit on a much smaller scale: countless talks about expanding consciousness, changing the world, raw water bollocks, a completely unsustainable business model and questionable transactions to some external consultants.
- dbuder 7y ago
  Please point me to where I can read more about the Juicero story, particularly the external consultants. It was just so comically bad on every level, it made me lose alot of respect for VCs.

DebtDeflation 7y ago

There was an article yesterday where Softbank was saying that they think they can renegotiate those LOCs to go forward even if there is no IPO this year. They might end up being a lot smaller and have worse terms for We though. I wouldn't be surprised if pushing Adam out was the first demand the banks made in that renegotiation. Softbank wants to delay the IPO now because it would mean a massive writedown of their investment value.

justincormack 7y ago
I think it is clear they have to write it down anyway in any reasonable accounting.
moltensodium 7y ago
Adam seems to be the scapegoat, somewhat justified of course, but the bigger problem of this company being an obvious scam with no way to make money has not been addressed.

joshcain 7y ago

Corporate governance was definitely a factor, but getting cut down from $47B to $10-15B is... a lot. Public market investors clearly have a much worse opinion of We's fundamentals than SoftBank did.

MiroF 7y ago
Yeah - these institutional investors have a lot riding on "the market was responding to weworks governance structure" and I don't think that is really representative of the facts.
- mason55 7y ago
  I mean, it likely doesn't hurt anything. I'm sure the underwriters (JPM etc.) have spoken to their institutional clients and no one has said "getting rid of Adam will make my valuation go down." So you get rid of Adam (and his supermajority voting rights) have some quiet conversations about how people value the company now. Then you decide if you're willing to take whatever haircut the market is offering from the last private round. If We is to be believed the other option is to halt all expansion. They claim that mature locations are cash flow positive. If that's true then you don't necessarily need to take a haircut, you just stop expanding, prove to the market that you actually do have a business, and then either start siphoning off the cash or try to IPO again.
braythwayt 7y ago
You are presuming that SOftBank believed in the fundamentals, and not in the proposition that if you carefully stage a series of cash injections at increasing valuations, the charismatic founder's PR halo will impart a shine onto the company's shares.
- ineedasername 7y ago
  In which case, the major failing of We was that it did not go public fast enough. I wonder if we'll see this translate into time pressure for future startups to go public a little earlier before the bloom is off the rose.

egdod 7y ago

> corporate governance was one of the main factors why the market refused to accept anything close to their last private valuation That’s not at all clear.

rootusrootus 7y ago

> slow 30-year-old companies like Regus Unless I am completely misunderstanding the value of WeWork, this ship seems to have already sailed. At least locally, Regus has offerings that are substantially the same in price and features to what WeWork has.

october_sky 7y ago
Also, smaller, regional real estate companies are doing this (generic co-working spaces) with empty office space, often on the ground floor. I visited a startup at one such location and was impressed with it. It's a strategy to capitalize on unused assets.