Tech Bubble 2 pop? WeWork IPO valuation collapse

[lakedaemonian]

Tech Bubble 2 pop?

WeWork provides on demand desk/office/meeting space mostly for the tech sector.

WeWork has some issues.

It’s really a property play pretending to be a tech company.

The founder has been playing silly control and personal hedging games.

Softbank Vision fund invested at $47 billion months ago, now reportedly looking at a $10-12 billion IPO valuation.

https://www.reuters.com/article/us-wework-ipo-valuation-exclusive/exclusive-wework-considers-ipo-valuation-of-as-low-as-10-billion-sources-idUSKCN1VY1PB

[Mega]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

How many more?
Tesla?

[jk]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

love that wework paid the founder $5.9million for the right to use the word "we." can't make this up. [he just gave it back] not long ago softbank invested $10billion at an enterprise valuation of $47billion. oops. might make it hard to raise money for their next fund. if there is a next fund. if i'm not mistaken [and i might well be- this next statement is kind of hazy in my memory] a valuation of $10-12billion wipes out all the employees' stock options. might make it hard to retain people.

i also read that there is another company currently operating on wework's model. can't recall its name. it actually makes a profit but trades at a low valuation.

[FrankL]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

love that wework paid the founder $5.9million for the right to use the word "we." can't make this up. [he just gave it back] not long ago softbank invested $10billion at an enterprise valuation of $47billion. oops. might make it hard to raise money for their next fund. if there is a next fund. if i'm not mistaken [and i might well be- this next statement is kind of hazy in my memory] a valuation of $10-12billion wipes out all the employees' stock options. might make it hard to retain people.

i also read that there is another company currently operating on wework's model. can't recall its name. it actually makes a profit but trades at a low valuation.

the company name is Regus, they also own a range of other brands (Spaces, HQ, etc).

[BK]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

Regus is one one several brands owned by http://www.iwgplc.com/OurCompanies/Regus

[FrankL]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

Regus is one one several brands owned by http://www.iwgplc.com/OurCompanies/Regus

The name 'International Workplace Group' only exists because of tax avoidance purposes. I've been using Regus (and other brands belonging to Regus) for many years, and I hadn't even heard of this holding company name until now.

[Chomsky]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

Tech Bubble 2 pop?

WeWork provides on demand desk/office/meeting space mostly for the tech sector.

WeWork has some issues.

It’s really a property play pretending to be a tech company.

The founder has been playing silly control and personal hedging games.

Softbank Vision fund invested at $47 billion months ago, now reportedly looking at a $10-12 billion IPO valuation.

https://www.reuters.com/article/us-wework-ipo-valuation-exclusive/exclusive-wework-considers-ipo-valuation-of-as-low-as-10-billion-sources-idUSKCN1VY1PB

WeWork Business Model Is Systemic Risk To Economy, Fed's Rosengren Warns

https://www.zerohedge.com/markets/we...osengren-warns

[lakedaemonian]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

WeWork Business Model Is Systemic Risk To Economy, Fed's Rosengren Warns



https://www.zerohedge.com/markets/we...osengren-warns

WEwork the new WEbvan?

[jk]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

WEwork the new WEbvan?

i think wework is the subprime of commercial real estate. it's a huge subprime TENANT ["one of the world's largest lessees"] which puts the office sector of commercial real-estate at risk. i'm not sure the retail real-estate apocalypse [because of e-commerce] is quite as bad as advertised, but there's some reality there too.

as rosengren points out, all this real estate is financed by the big banks. anyone know if those mortgages have been securitized? and if so, who the buyers have been? a little googling reveals that cmbs and remics are the instruments, and that there are indeed etf's and closed end funds which hold these instruments. yield hungry? one might want to avoid these if in a defensive mood.

[lakedaemonian]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

i think wework is the subprime of commercial real estate. it's a huge subprime TENANT ["one of the world's largest lessees"] which puts the office sector of commercial real-estate at risk. i'm not sure the retail real-estate apocalypse [because of e-commerce] is quite as bad as advertised, but there's some reality there too.

as rosengren points out, all this real estate is financed by the big banks. anyone know if those mortgages have been securitized? and if so, who the buyers have been? a little googling reveals that cmbs and remics are the instruments, and that there are indeed etf's and closed end funds which hold these instruments. yield hungry? one might want to avoid these if in a defensive mood.

I have no idea what to make of WeWork’s impact on CRE if they collapse.

US Retail CRE is still 89.3% of all retail, but the 10.7% of total retail that is e-commerce is the majority of all retail growth.

I’ve seen rough numbers that show for every 1 job Amazon creates, 3 traditional brick and mortar retained related jobs are lost.

As e-commerce continues to grow and traditional bricks and mortar further slows I reckon we will see an accelerating decline of traditional bricks and mortar retail, here’s why:

I believe most, if not all, bricks and mortar retailer profit comes from the final 10-20% of retail sales.

If bricks and mortar takes a haircut of 10-20% while stuck with the same high fixed operating costs then they are:

1) dead
2) soon to be dead as they lack the resourcing to reinvent themselves “innovator’s dilemma”

So I think we might see an accelerating decline of traditional bricks and mortar retailing, only partially backfilled by internet 1st D2C “experiences”.

Just look at most shopping malls. There are a small number of ver high end/experiential malls doing well, but the majority I have visited are in clear decline.

Where does this leave WeWork?

I have no idea, but perhaps for every 3 sq. ft. of soon to be empty retail CRE there will be a need for 1 sq. ft of office/distribution CRE.

Maybe WeWork will pivot to WeTownSquare, lease dead malls, and turn them into pseudo Apple Stores.

Not sure about that revenue model and value proposition either.

——-
My interaction with WeWork has been entirely thru Bunker Labs, a veteran entrepreneurship community that is provided pro bono space by WeWork. Talking to WeWork staff at the events I’ve attended they’ve been pretty young, naive, and trusting that everything stacks up.

I do know that WeWork is offering a free year’s hot desk subscription for every new AMEX Platinum card holder, perhaps to put bums on seats.

The likes of VirZOOM, Peloton, et al are disrupting the gym industry reliant on subscription members paying but not going.

Surely WeWork can’t rely on the same subscriber behaviour and economics.

I remember reading here a decade ago about China’s oversupply of Office space, IIRC enough to put every Chinese in a cubicle, but nothing serious seemed to eventuate.

Maybe WeWork is the new WeBvan, but the impact is absorbed by the velocity of new value creation/capture?

I do wonder how much the reduction in friction that the likes of AWS, Stripe, and Shopify have greased changes the traditional calculus?

[touchring]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

Has anyone considered that WeWork is actually subsidizing startups by providing cheap fun rentals? WeWork might be the microsoft linkedin equivalent for Softbank.

[lakedaemonian]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

WeWork CEO/co-founder is gone:

https://www.cnbc.com/2019/09/24/wewo...e=morning_brew

[jk]

Re: Tech Bubble 2 pop? WeWork IPO valuation collapse

commercial real estate, unlike gaul, is divided into FOUR parts: retail; office; multi-family; and industrial. i think each sector has to be analyzed independently.i have the impression that multi-family is doing well - not luxury condo development but actual rental businesses.retail is pressured.office must already be squeezed by the slowdown but if wework implodes it looks like real trouble, with knock on effects for etf's, cef's, mutual funds, probably pension funds, insurance companies.