3 ms·

Mmm, it's interesting. There's really two options here: Option A: Son is right, and the market is wrong. WeWork is a ~$50b company, and after a bit of hardba

by Lazare 7y ago

Mmm, it's interesting. There's really two options here: Option A: Son is right, and the market is wrong. WeWork is a ~$50b company, and after a bit of hardball SoftBank will own 70% of it for a very affordable $15b (or whatever it is). And once the market catches on, WeWork's valuation will quintuple overnight, netting the Vision Fund a nice profit and Son the right to be very, very smug. Option B: The market is right, and Son is wrong. WeWork is a ~$10b company, which through a fit of almost comic mismanagement Son has managed to pay ~$15b for (and still owns only a bare majority). With a lot of work (and thanks to getting rid of Neumann), it might one day be worth enough SoftBank/the Vision fund is (barely) not below water, but even that's iffy. I'm no expert, and while on paper option B does look pretty compelling, let's say maybe option A is right after all. In which case... ...given that Son is just a uniquely talented visionary, and saw potential that nobody else (and especially not other potential investors) saw, uh...why in the hell did he keep investing at higher and higher valuations? Like, if the market is just dumb and can't see that WeWork is worth $50b, not $10b, then....why invest at a $50b valuation? Unless it was just a glorified pump-and-dump all along (ie, Son never thought it was worth $50b, but he thought other people could be fooled into thinking it), in which case, why invest now? Does he think he's going to get a second bite at the apple? It's really hard to imagine us all being here in 18-36 months going "wow, WeWork sure has turned things around, I think their IPO will price at $60b!" Right? Isn't the WeWork hype irrevocably gone? This whole thing is so odd. Is it really as simple as "we're just piling billions of dollars up and setting them on fire because we love expensive bonfires"? Is that it?

arbuge 7y ago
There is an Option C: bankruptcy or fire sale. It's quite possible that the company will remain a loss-making convoluted mess of SPEs that will never turn a profit in time to avoid that outcome.
- empath75 7y ago
  Yeah there's a real possibility that wework is worth nothing.
DebtDeflation 7y ago
Option C: WeWork is a $5B company IF it can become profitable and IF there is no economic recession over the next year or so. Son is just saving face at this point.
- ibero 7y ago
  I think this is how it has to be seen, not as an individual investment but as a strategy to save face for the whole Softbank portfolio. It is better to dump 5 billion into WeWork to move it from the "sure fire bankruptcy today" category into the "questionably over-investment with 18 month runway" category. Doing this keeps pressure off the entire investment portfolio now at a critical time when they are looking to raise funds for the new Vision Fund. Also, there seems to be a bit of helping out JP Morgan as well. The article goes out of its way to link this cash infusion to helping repay JP Morgan credit line for Neumann. If nothing else, the article helps calm people/investors that JP Morgan wont be left holding the bag on that.
empath75 7y ago
> given that Son is just a uniquely talented visionary He's lost more money than anyone in history. And probably is about to do it a second time.
- et2o 7y ago
  ?
  - adventured 7y ago
    That's based on Son having a paper net worth of ~$85-$90 billion at the peak of the dotcom bubble and seeing all but about $3 billion of it vanish, peak to trough. You can move the numbers a bit (eg debate over the peak figure), however it still comes out in a similar way... he plausibly lost the most wealth - on paper - of any person that has ever lived. Yasumitsu Shigeta, another Japanese dotcom super billionaire, lost around $41 billion on paper during the crash. He recovered somewhat and remains a billionaire.
- navigatesol 7y ago
  >He's lost more money than anyone in history. In Silicon Valley, "failing" is a virtue, so it's not surprising to read this about Son. The guy invested billions of dollars of OPM (some of it blood money from Saudi Arabia) into tech business at terrible valuations. Anyone with an IQ of 80+ and a modicum of social skills could do the same. Remember the Vision Fund hockey-stick chart slide, with flying unicorns and "AI Traffic"? Such vision.
notfromhere 7y ago
Option C is: sustain WeWork long enough to raise Vision Fund II and then let it implode. This is a face saving exercise. Son’s not an investor, he’s a gambler. They gave a dog walking app 300M. There’s no “vision” here, just a peak bubble scam.
woeirua 7y ago
Option D: WeWork is a $0 company, and this is the last move of a company desperate to avoid recognizing the loss.
buboard 7y ago
It s as if somebody was laundering money
rasz 7y ago
Son is losing money on every individual investment, but he will make it up in volume, like he did in the 2000 oh, wait

by Lazare 7y ago

arbuge 7y ago

There is an Option C: bankruptcy or fire sale. It's quite possible that the company will remain a loss-making convoluted mess of SPEs that will never turn a profit in time to avoid that outcome.

empath75 7y ago
Yeah there's a real possibility that wework is worth nothing.

DebtDeflation 7y ago

Option C: WeWork is a $5B company IF it can become profitable and IF there is no economic recession over the next year or so. Son is just saving face at this point.

ibero 7y ago
I think this is how it has to be seen, not as an individual investment but as a strategy to save face for the whole Softbank portfolio. It is better to dump 5 billion into WeWork to move it from the "sure fire bankruptcy today" category into the "questionably over-investment with 18 month runway" category. Doing this keeps pressure off the entire investment portfolio now at a critical time when they are looking to raise funds for the new Vision Fund. Also, there seems to be a bit of helping out JP Morgan as well. The article goes out of its way to link this cash infusion to helping repay JP Morgan credit line for Neumann. If nothing else, the article helps calm people/investors that JP Morgan wont be left holding the bag on that.

empath75 7y ago

> given that Son is just a uniquely talented visionary He's lost more money than anyone in history. And probably is about to do it a second time.

et2o 7y ago
?
- adventured 7y ago
  That's based on Son having a paper net worth of ~$85-$90 billion at the peak of the dotcom bubble and seeing all but about $3 billion of it vanish, peak to trough. You can move the numbers a bit (eg debate over the peak figure), however it still comes out in a similar way... he plausibly lost the most wealth - on paper - of any person that has ever lived. Yasumitsu Shigeta, another Japanese dotcom super billionaire, lost around $41 billion on paper during the crash. He recovered somewhat and remains a billionaire.
navigatesol 7y ago
>He's lost more money than anyone in history. In Silicon Valley, "failing" is a virtue, so it's not surprising to read this about Son. The guy invested billions of dollars of OPM (some of it blood money from Saudi Arabia) into tech business at terrible valuations. Anyone with an IQ of 80+ and a modicum of social skills could do the same. Remember the Vision Fund hockey-stick chart slide, with flying unicorns and "AI Traffic"? Such vision.

notfromhere 7y ago

Option C is: sustain WeWork long enough to raise Vision Fund II and then let it implode. This is a face saving exercise. Son’s not an investor, he’s a gambler. They gave a dog walking app 300M. There’s no “vision” here, just a peak bubble scam.

woeirua 7y ago

Option D: WeWork is a $0 company, and this is the last move of a company desperate to avoid recognizing the loss.

buboard 7y ago

It s as if somebody was laundering money

rasz 7y ago

Son is losing money on every individual investment, but he will make it up in volume, like he did in the 2000 oh, wait