6 ms·
How is this anything but the sunk-cost fallacy, throwing bad money after bad? Seriously looking for someone to explain why the WeWork glass is half-full.
by artfulhippo 7y ago
How is this anything but the sunk-cost fallacy, throwing bad money after bad?
Seriously looking for someone to explain why the WeWork glass is half-full.
- bhouston 7y agoWhy wouldn't it be easier to rebuild this in the midst of a recession from scratch when rent is cheaper.
- losteric 7y agoSame reason rent would be cheaper - fewer potential renters, especially new small businesses
- harryh 7y agoThey rent buildings long term for low prices and then lease them back out in small pieces at higher prices. If they can keep the buildings full enough, they could make a lot of money! Right now most of their buildings are still pretty new, so they are not full enough, but that should change over time.
- rosege 7y agoYes Regus does this and is profitable - given Regus is valued at $3 bil It might make sense to buy them instead of pumping another $3 bil into WeWork that doesn't look like it will ever make a profit.
- harryh 7y agoMaybe if you are talking about some random investor. But if we're talking about SoftBank, which already owns ~30% of WeWork, probably not.
- rosege 7y agoYes but sometimes even for companies in their position they say enough is enough to the losses and choose to let them go into administration instead. I'd say its unlikely SoftBank will choose this but it is an option for them.
- harryh 7y agoThey can kinda do something half way in that direction just by waiting. The lower WeWork's cash on hand gets, the harder of a position Neumann is in. Of course, it's not clear if it's a credible bluff since Softbank isn't in a great position either. Interesting negotiating position!
- ulfw 7y agoOr buy Regus for said $3B and combine that with Wework at a much lower valuation. Own the market. Own 51% of the whole shebang. Done. But in real life things are not quite that easy ;)
- pbreit 7y agoWhat would buying Regus get you besides a slow growth, lousy brand?
- disgruntledphd2 7y agoLots of people who know how to run the WeWork model profitably?
- manigandham 7y agoA valuable and profitable business. How much did WeWork's brand help exactly? It just made the crash harder. Nobody cares about a brand, and definitely not when it comes to office space.
- pbreit 7y agoNope. WeWork is clearly the "go to" brand in the flexible office leasing category. Regus' brand is "has been".
- manigandham 7y agoI don't see how two massive profitable companies with more members and locations and revenue are somehow worse as a brand than WeWork because of something as silly as a brand name. Perhaps WeWork is meant for those who look at such superficial details when dealing with office space but it's not the majority. Anyways whatever brand they had has transformed from asset to liability now when 75% of the valuation evaporated in 2 weeks. An overinflated bubble investment with no serious metrics or leadership is not clearly anything of reference.
- 7y ago
- SkyPuncher 7y agoRegus does something similar, but slightly different. Regus is geared towards small businesses anticipating a long-term home. WeWork is geared towards individuals and companies that don't know if they'll be around in one year. As a freelancer, Regus is too large of a commitment while WeWork is more manageable.
- pbreit 7y agoNo true. WeWork's business has already moved very firmly into stabler, longer lived tenants.
- cm2012 7y agoI had a month to month lease with Regus a couple of years ago.
- manigandham 7y agoRegus offers all the same flexibility as WeWork but without the flashy decorations and services, and thus offers a lower price premium. If you still want all that then Regus has a new sub brand called Spaces: https://www.spacesworks.com/ https://www.spacesworks.com/
- mcintyre1994 7y agoWorking out of a Spaces office - I'd have to disagree. Services not provided include microwaves, coffee, reliable Wifi, working Ethernet ports, comfortable office temperature, remotely competent staff, reliablly being able to unlock your office door, an ability not to throw away personal belongings in the kitchen, breakout areas (they're turning > half of every kitchen into another office and they're already tiny compared to WeWork's), clean toilets, clean kitchens, any events, any sort of help with letting guests into the building.
- manigandham 7y agoHave you tried the standard Regus offices?
- pfarnsworth 7y agoWeWork buidings are filled with clients that are brought in by other SoftBank money. It's human-centipede equivalent of VC-funds circling back around to each other, in hopes that suckers will invest in it and then they pull out.
- pbreit 7y agoWeWork dominates the flexible office leasing business any many large and important markets around the world. It would be difficult and perhaps impossible to replicate what WeWork has achieved. And since it can make money at 50-80% occupancy rates, there's a massive profit opportunity.
- goatinaboat 7y agoIt would be difficult and perhaps impossible to replicate what WeWork has achieved Well, apart from that IWG had already achieved it, of course.
- pbreit 7y agoRegus has taken 30 years to become much smaller than WeWork.
- manigandham 7y agoIWG is bigger than WeWork in every metric (sq footage, members, locations, and revenue) in 2018. Anyone can grow fast by spending easy money without any need to earn a profit. What does that prove exactly?
- manigandham 7y agoIt's been done for a century before and has 2 major profitable companies with sound and proven financials. WeWork is absolutely nothing new, the industry already knows what the optimal numbers need to be and WeWork is nowhere near them to ever be a profitable business in its current form.
- philwelch 7y agoThe most obvious problem with WeWork is that the company has been run by someone who is some combination of corrupt and insane. Changing that element is an obvious solution to at least try.
- notfromhere 7y agoWeWork collapsing makes raising Vision Fund II impossible. Letting it survive until the fund closes makes the 6B worth it