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WeWork Plans to File for Bankruptcy as Early as Next Week
- croes 3y agoAt least they owned their assets and didn't just exploit the ones of their users, looking at you Uber and Airbnb.
- woleium 3y agoI don’t think that’s true, didn’t they sign a bunch of hard-to-get-out-of leases for properties that Adam Neumann purchased personally? How he got that past the board is beyond me.
- drjasonharrison 3y agoBefore he was the majority voting shareholder he couldn't. After he gained control of 65% of the votes.... Wall Street Journal article from 2019: https://www.wsj.com/articles/weworks-ceo-makes-millions-as-landlord-to-wework-11547640000 https://www.wsj.com/articles/weworks-ceo-makes-millions-as-l... Accessed via: https://archive.ph/jzsxI https://archive.ph/jzsxI
- userinanother 3y agoWell actually… didn’t they lease buildings with shell companies and almost no recourse by building owners? I think a bunch of commercial real estate holders are gonna be holding a bag of pants.
- 60secs 3y agoSeems he internalized the lessons from Ray Kroc, only he used real estate to extract wealth from investors/shareholders instead of franchisees. "owning the land on which the burger is cooked" https://techcrunch.com/2019/01/16/we-company-ceo-in-hot-water-over-being-both-a-tenant-and-a-landlord/ https://techcrunch.com/2019/01/16/we-company-ceo-in-hot-wate... Scene from "The Founder" "You have a miniscule revenue stream, no cash reserves, and an albatross of a contract.... What you ought to be doing is buying up plots of land, then turning around and leasing said plots to franchisees, who as a condition of their deal should be permitted to lease from you and you alone. This will provide you with two things: One, a steady, upfront revenue stream. Money flows in before the first stake is in the ground. Two, greater capital for expansion. Which in turn fuels further land acquisition, which in turn fuels further expansion. And so on and so on. Land... That’s where the money is. (BEAT) And control." https://www.youtube.com/watch?v=uxCL2RqCuiY https://www.youtube.com/watch?v=uxCL2RqCuiY
- illwrks 3y agoIn the modern take, replace land with users/eyeballs.
- rchaud 3y agoNot anymore. See Reddit. Eyeballs aren't worth anything without a solid advertiser inventory.
- userinanother 3y agoSeems like he did a bit of both.
- croes 3y agoIt is merely a translation error on my part, I meant own or possess. Uber and Airbnb outsourced the risks of these assets. If some cars or flats are suddenly no longer in demand, there is no cost to them. If WeWork had functioned like an Airbnb for offices, underperforming locations would have been less of a problem.
- lxgr 3y agoDo they own a lot of buildings? I thought most of them were long-term leases. Their balance sheet only lists $3 Billion of property assets and equipment [1]; that's not that much office space in the tech capitals of the world. [1] https://investors.wework.com/news-and-events/press-releases/financial-releases-details/2023/WeWork-Reports-Second-Quarter-2023-Results/default.aspx https://investors.wework.com/news-and-events/press-releases/...
- paxys 3y agoWhat assets? Almost all of WeWork's office space is leased. The company owns nothing. The "exploiters" Uber and Airbnb were at least able to build a sustainable business. WeWork was a scam from day one.
- potatolicious 3y agoEhh, I disagree. OP is incorrect in that WeWork owns little of their own real estate, but from what we can tell they were leased at fair market rates from their actual owners (some of whom are Adam Neumann himself, which is... bad). The only parties that really got fleeced here were Softbank and their totally unclothed VC siblings who bought Neumann's messianic complex like rubes. Building owners by and large seem to have been treated fairly? I would argue the gig economy has been worse, since those who got fleeced were largely working people being squeezed and having massive externalities and liabilities dumped onto them.
- userinanother 3y agoThe building owners were absolutely greedy fools to sign those lease agreements they will go bankrupt
- croes 3y agoUber and Airbnb are sustainable because they exploit in the first place. They have zero risk on the assets because they are owned by the users.
- deleted 3y ago[deleted]
- FireBeyond 3y agoHah, not so much. Many times, WeWork loaned Neumann the money (at spectacularly good interest rates), he personally purchased the property, and then leased it to WeWork.
- rchaud 3y agoReminds me of Enron, where the clowns in charge happily handed their corrupt CFO Andrew Fastow hundreds of millions to run a private equity fund that purported to purchase loss-making assets at a profit to Enron. Then, after Enron reported good quarterly numbers, this fake fund would simply sell the stake back to Enron, with the CFO taking a gigantic management fee for orchestrating the charade. Public companies have been banned from doing this, but I guess anything goes when you're private.
- croes 3y agoIt is merely a translation error on my part. Uber and Airbnb don't do that, they are just the service for others to rent out their assets. So the risk of running costs in times of low business activity, such as a pandemic, is not on their side.
- purpleblue 3y agoHow does Softbank still keep standing? They keep losing on the vast majority investment they've made, and yet they haven't come up against any financial issues? I feel like Softbank going bankrupt is going to be the Black Swan that affects Silicon Valley the most.
- alephnerd 3y agoThey got a couple wins recently with the ARM IPO, Coupang IPO, and ByteDance (aka TikTok). WeWork (and Uber) has been a massive hole, but SoftBank is diversified enough that they can withstand it. They have historically been one of the biggest movers in Chinese and Indian Growth VC, and have a significant presence in American Growth VC too. They made oodles of money off Slack and DoorDash for example, and their 2010s investment phase was thanks to them being flush with profits from Alibaba and Tencent. At the end of the day, compared to most other Growth Funds, they tend to hire some solid investors who know how to find capable operators. Though, lapses of judgement do happen a la Neumann, but that's like saying anyone who invested in Pivotal or Joyent is dumb. This is VC. It's not guaranteed returns. There's a reason why it's called VENTURE capital.
- tpmx 3y agoSaudi oil money.
- alephnerd 3y agoThe Saudis pulled out. Vision Fund 2 (aka SoftBank today) is primarily Softbank's own money [0] [0] - https://pitchbook.com/news/articles/softbank-earnings-vision-fund-2-fundraising https://pitchbook.com/news/articles/softbank-earnings-vision...
- seydor 3y agoit better be described as "spiritual ascension" or "weBust" or something
- deleted 3y ago[deleted]
- ilrwbwrkhv 3y agoHe is a billionaire now and is raising money with Marc Anderson in Saudi.
- FFP999 3y ago[dead]
- willsmith72 3y agoPaywalled, what's happening with their assets? Is there a buyer?
- ksherlock 3y agoIt's Chapter 11 bankruptcy which means the company still exists and becomes property of the creditors (debtor in possession).
- deleted 3y ago[deleted]
- cbron 3y agoReuters has some info, no apparent buyer: https://www.reuters.com/markets/deals/wework-plans-file-bankruptcy-early-next-week-wsj-2023-10-31/ https://www.reuters.com/markets/deals/wework-plans-file-bank...
- aragonite 3y agoDelta, Six Flags and GM filed and successfully exited chapter 11 in recent memory. I hope at least my local wework (in Brooklyn) doesn't get shut down! More and more people are coming in to use hot desks, though the private offices are still half empty.
- Mistletoe 3y agoI think the problem is more that the idea isn't sustainable in any way.
- willsmith72 3y agoit's kind of interesting that it's not though, isn't it? intuitively, a shared office space makes sense to me. I find it really useful as a remote employee to get out of the house a couple of days a week, and for my employer it's pretty cheap and is a perk which helps them hire from all over the world, also cheaper than hiring american engineers. Is it just a pricing issue? Hot desks are about 250 USD/month
- ilamont 3y agoI've been telling entrepreneurs to "know your limits." Knowing your own limitations gives rise to endless possibilities. Because I understand that my abilities are limited, I've surrounded myself with entrepreneurs who are more talented than me, and by letting them take the lead, infinite possibilities come to light. I believe that the information revolution will last 300 years -- from PCs to the internet and on to AI. How do I make SoftBank into a corporate group that will keep growing for 300 years? Understanding that an organization can't be sustained with just one technology, one business model or one leader will let it prosper for a long time. - SoftBank Group chief Masayoshi Son, 2019 https://asia.nikkei.com/Editor-s-Picks/Interview/I-had-a-chance-to-invest-in-Amazon-Google-and-Baidu-SoftBank-s-Son https://asia.nikkei.com/Editor-s-Picks/Interview/I-had-a-cha...
- deleted 3y ago[deleted]
- thumbsup-_- 3y agoWhen times are good, everyone has wisdom and is a visionary.
- paxys 3y agoKudos to WeWork for surviving the first five implosions I guess. The charade went on for far longer than I thought it would.
- deleted 3y ago[deleted]
- m0llusk 3y agoThis is really good news for actual real players in the coworking space. Being disruptive with venture money conceivably helps new offerings along, but in this case it was never anything but a massive fraud that distorted the entire market.
- CPLX 3y agoNo it’s not. The only other real player is Regus and they are absolutely f’cking horrible with bad poorly run spaces and predatory billing. They’re a scourge. The WeWork product is fantastic and I’ve tried all alternatives. I’m in a different city basically every week and if they go under or stop being basically the same I’ll seriously mourn the loss.
- Daishiman 3y agoSeems like Regus might be closer to the real cost of renting commercial space.
- CPLX 3y agoIt’s not the cost they’re both sort of comparable and WeWork isn’t really like the discount option. It’s that WeWork is SO MUCH better run. The keycards work the website works and has current accurate information and so on. Regus/Spaces makes the DMV look like an elite customer service organization. The second time you book on their app and end up at a building under construction you’ll say the same.
- stuartjohnson12 3y ago+10000000 Things that have happened to me at Regus: 1. Asking the floor manager to practice his singing more quietly across the hall (seriously) 2. The rep supposed to be giving the tour forgetting to turn up and calling me several hours later to apologize 3. Someone loudly telepreaching from the next room every day in the style of shouting
- paxys 3y ago
- muttantt 3y agoYikes. Sitting at a WeWork right now... Love it, I often have an entire floor jus to myself. Many locations are ghost towns, some have entire floors shut down.
- artdigital 3y agoI have a personal WeWork subscription and love every bit of it. I travel a lot and can use any of the WeWork locations to get my work done. Far better than any cafe I would ever be able to find (obviously) As a private, non corporate costumer, I’m sad to see them go. “Ghost town” probably depends on your location and country. The ones here are sometimes so full that if you don’t book in advance, you can’t get a seat for on-demand
- userinanother 3y agoEnjoy that last bit of investor waste and excess
- stevage 3y agoWait, you enjoy the experience of going to a co-working space with no one else around? Why is that?
- tomlockwood 3y agoTo be honest, I thought this had already happened. Maybe I'm just an idiot, considering I'd thought that had happened, and yet worked from a WeWork a couple months ago.
- jameslk 3y agoI’m curious how hard this is going to hit commercial real estate, which already seems to be on the brink of collapse. What are the cascading effects like the subprime mortgage crisis?
- rottencupcakes 3y agoAfaict, the reason they announced that they most definitely may be going into bankruptcy next week is to play hardball with their commercial land lords and try to get a deal which will keep them alive. The idea being that the landlords (and everybody) knows that the commercial real estate market is super depressed, so if WeWork disappears the landlords may be stuck with an empty building for years.
- Havoc 3y agoUnless all their landlords globally are coming up for renegotiation this week that makes little sense
- chrischen 3y agoAlso Regus pulled the same move already https://globalinsolvency.com/headlines/iwg-plans-set-regus-insolvency https://globalinsolvency.com/headlines/iwg-plans-set-regus-i...
- userinanother 3y agoCRE has been slow to collapse because forced selling hasn’t quite happened yet so everyone is still trying to extend and pretend
- Rapzid 3y agoHas it really dried up or is it good for a few more pumps?
- rvz 3y agoAfter almost 1 month [0] WeAreBroke. [0] https://news.ycombinator.com/item?id=37750481 https://news.ycombinator.com/item?id=37750481
- _lvbh 3y agoI thought it collapsed years ago. Had no idea it was still alive
- HappyDaoDude 3y agoThe market will remain irrational far longer than even the most pessimistic takes.
- underseacables 3y agoI can't help but think Adam Neumann is still laughing all the way to the bank.
- userinanother 3y agoI’m sure he’s waiting for the next batch of suckers
- chrischen 3y agoHe's already on a new Venture, with billion+ investment from Andreesen.
- faeriechangling 3y agoHe really makes me think hard about what success means.
- yieldcrv 3y agoCorporations are conduits for the founding shareholders and other beneficiaries of the money conduit Success of the corporation has nothing to do with the success of the founding shareholders, if being used as a conduit: something to draw a salary from, something to sell related property to, something to sell your shared of. Authorize more shares to be created to replenish holdings. Vest at whatever speed you want (30 days? Why not) Neumann understood that, his employees and sycophants should have understood that but did not. I’m currently with a company where all the employees have never been in a “tech startup” and think we are one, when we’re not. I’m the only one that seems to have experience with a tech VC backed tech startups to tell the difference. I think its weirder that there aren’t more of him. Like, people either get too risk averse or comfortable at sort of outdated amounts of money. Or they create companies with this wide ensemble cast of characters for clout, which is also very outdated and unnecessary for what these companies do, which also prevents them from having flexibility on how to direct the conduit to their pockets. But its all so outdated, given the expansion of the money supply there should be way more Neumans, way more Bill Hwangs a version that didnt get margin called and liquidated everything successfully.
- iancmceachern 3y agoI wonder if ill be able to buy a wework sign on some sort of auction. I tried to buy one of the Twitter signs but they required thT you remove them yourself and secure associated permits etc. on your own. No joke
- ta988 3y agoWell the people removing them are likely going to sell them, I don't see why anybody would do the work for you.
- iancmceachern 3y agoWhen you go to a garage sale and buy a used TV antenna off your neighbor do they usually ask you to crawl up on their roof and remove it? I think what Twitter was expecting is what was strange.
- ta988 3y agoNot really, a tv antenna, outside of some rare exception is not a collectible. I'm sure that sign will sell for a lot of money.
- iancmceachern 3y agoI dont know, it's pretty giant and would be difficult to display inside
- toomuchtodo 3y agoIf you move quick, you don’t need the permit, just labor and equipment. Hard hat, hi vis vest, and clipboard too. (Demo’d a dilapidated house in a historic district once, in and out in a day with no permits or city approval)
- iancmceachern 3y agoAh, the classic Ghostbusters 1 technique. So because yoi got away with doing something illegal other should do illegal things?
- AirMax98 3y agoI worked from a few locations in Philly and they were always totally empty. There was like a staff of 12+ well-meaning but extremely bored WeWork employees there attending to my needs, and the shitty YC startup I was at a few years back got some insane discount for a luxe plan there. Even in like, 2019 before their failed IPO it was clearly a dog company. Really a marker that we are at an end of an era of excess — glad that I got to enjoy the ride of other people’s money, even if only in a slight way.
- CPLX 3y agoI was at a WeWork in Philly two weeks ago and I was sitting on a couch when a rep met with a prospective tenant and was told that they were totally booked up at that location for offices. Later that day I was at another WeWork in Philly that was packed in all common areas. There are some that are always a little sparse to be sure, like the Navy Yard in Brooklyn, but I’ve been to 75+ in the past year or so in 5 different countries and for the most part they are well used and the permanent office parts are really full. Not saying it’s financially sound but the core product is real. If I had to guess I would assume the issue is spending from boom times and debt. Theres an actual business there too.
- paulcole 3y agoBoth the Philly locations are on the new cheaper tier of their All Access plan. It basically cut the cost by 50% for a lot of users. The Portland location I go to has been packed as a result.
- cgeier 3y agoSame here in Hamburg, Germany. Most offices are rented, it was hard to an office of the size we wanted, there was exactly one available in four locations. Even their EBITDA is negative, so debt is not the (only) issue. Perhaps they have locked themselves into long-term overpriced rental agreements?