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They have significantly higher brand value than Regus, which does merit a premium though probably not 5x.

by ummonk 7y ago

arcticbull 7y ago
Brand value, maybe (even after this?) but they definitely haven't proven that they can turn that brand equity into higher margins. I believe if two offices were priced the same, someone might pick WeWork, but would people pay WeWork more than Regus for a comparable office? I'd imagine not much.
- rollerboi 7y ago
  If I could chime in here - WeWork was way overvalued because they sold themselves to the public as a "tech company" that dabbled in real estate, not a real estate company that dabbled in tech. I mean, they had a lot of the same characteristics (such as crazy revenue growth while operating at a loss), but let's be clear: WeWork isn't a tech company, they're a real estate company in "tech clothes." To circle this back to the parent comment - I still don't think they'll be profitable after drastically cutting spending. They might be able to keep the company afloat for a little bit. But their spending cuts target parts of the business that aren't under their "core competency" which is leasing office space on a short-term basis. So for example, they ax'd plans for WeLive or WeSchool (or whatever their kindergarten plans were called) as part of their turnaround plan. WeWork has something like $17B in long-term lease liabilities across major cities in the US (and UK, I believe). They signed these long-term (10+ years I believe) leases with hopes of turning around and leasing them back to freelancers/businesses on a short-term (3-6mo) basis. If the economy slows down and demand for this variable-term space dries up, WeWork will still be on the hook for those $17B leases.
- ummonk 7y ago
  People would certainly pay a premium for WeWork offices, though it is unclear how much of WeWork’s superior offering could be retained while bringing costs under control.

They have significantly higher brand value than Regus, which does merit a premium though probably not 5x.

by ummonk 7y ago

They have significantly higher brand value than Regus, which does merit a premium though probably not 5x.

Brand value, maybe (even after this?) but they definitely haven't proven that they can turn that brand equity into higher margins. I believe if two offices were priced the same, someone might pick WeWork, but would people pay WeWork more than Regus for a comparable office? I'd imagine not much.

rollerboi 7y ago
If I could chime in here - WeWork was way overvalued because they sold themselves to the public as a "tech company" that dabbled in real estate, not a real estate company that dabbled in tech. I mean, they had a lot of the same characteristics (such as crazy revenue growth while operating at a loss), but let's be clear: WeWork isn't a tech company, they're a real estate company in "tech clothes." To circle this back to the parent comment - I still don't think they'll be profitable after drastically cutting spending. They might be able to keep the company afloat for a little bit. But their spending cuts target parts of the business that aren't under their "core competency" which is leasing office space on a short-term basis. So for example, they ax'd plans for WeLive or WeSchool (or whatever their kindergarten plans were called) as part of their turnaround plan. WeWork has something like $17B in long-term lease liabilities across major cities in the US (and UK, I believe). They signed these long-term (10+ years I believe) leases with hopes of turning around and leasing them back to freelancers/businesses on a short-term (3-6mo) basis. If the economy slows down and demand for this variable-term space dries up, WeWork will still be on the hook for those $17B leases.
ummonk 7y ago
People would certainly pay a premium for WeWork offices, though it is unclear how much of WeWork’s superior offering could be retained while bringing costs under control.