
SoftBank to write down WeWork by $6.6B, compounding portfolio misery - nopriorarrests
https://mobile.reuters.com/article/idUSKBN22C011
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Droobfest
_The highly leveraged conglomerate has been forced into selling major assets
to raise funds, but could receive a big boost from the Bank of Japan’s plan to
expand corporate bond buying, which would support its predilection for
borrowing._

The Japanese taxpayer (Yen-holder) having to support the losses of Adam
Neumann's personal money tree seems pretty crazy to me.

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LordOfWolves
This sounds a bit similar to - and just as ludicrous as - American taxpayers
financially assisting or “bailing out” massive companies which were/are so bad
at cash flow management that their runway was/is only 1-3 months, despite
hundreds of millions - if not billions - in annual revenue and a varying chunk
of that being profit.

~~~
golergka
American taxpayers invest their 401k money into american stock market, and
they vote with their money for such companies. I'm against bailouts on
libertarian principles, but if you're going to do bailouts at all, I don't see
any reason why you wouldn't bailout these companies.

(And, every time bailouts are mentioned, I have to notice that it's not free
money, it's loans, with interests, and 2008 bailout have actually made money
for american taxpayers in the end. May be not as much money as other
investments would, but it also had a nice side effect of saving american (and
probably world) economy from even worse disaster).

Edit: OK, I was wroung about free money, by bad. But when the 2008 bailour is
mentioned, I feel that most people discussing it still think of it as some
sort of handout.

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jlmorton
That's not exactly true this time. The airlines, for instance, are getting
about $35 billion in outright grants, and $15 billion in loans and warrants
equal to 10% of the total.

The large part of it is free money, and many major US airlines have been the
worst offenders at financial engineering, spending the large part of their
free cash flow on stock buybacks, and running the business on razor margins.

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code4tee
WeWork is effectively worth nothing at this point.

Their revenue surely has tanked given everything and won’t just magically
return to normal. They’re sitting on massive liabilities with all the leases
and capital they invested in locations. Yes leases could be renegotiated etc.
but given WeWork’s woes that long predate COVID-19 it’s very unclear how they
survive much longer beyond perhaps being sold for scrap in some sort of fire
sale.

It’s crazy to remember that less than a year ago there was serious movement
towards a WeWork IPO.

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simonh
The shame is that they will probably blame all of this on the Pandemic, rather
than fundamental issues with the business that were becoming clear long before
the virus hit.

~~~
rchaud
The blame for this falls solely on the laughable prospectus they issued ahead
of the IPO. I was relieved that everyone in the finance world appeared to call
it for what it is.

While I hope the BOJ and the Japanese taxpayer aren't on the hook for
Softbank's hubris (not just with WeWork but also Oyo and Uber), I am glad that
pension and mutual funds won't have any exposure to this flaming pile of
garbage.

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roland35
_“Every writedown takes Wework’s carrying value closer to reality. Clearly the
value is zero,” said Kirk Boodry, an analyst at Redex Holdings._

I wonder if the value will be less than 0 soon with all of the liabilities
WeWork has!

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dannyw
Limited liability companies cannot have a value less than zero in general.
However, WeWork’s lawsuit against SoftBank could very well be successful;
effectively making it negative for SoftBank.

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Traster
WeWork's lawsuit against softbank only succeeds if it lives long enough to get
to a court decision, and Softbank are in quite a strong position to stop that
happening.

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code4tee
When the final lifeline for your company is suing your primary investor over
competing definitions of just how terrible the company is performing then I’m
not sure it’s worth much for either party!

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aryonoco
Best quote from an analyst: “Every writedown takes Wework’s carrying value
closer to reality. Clearly the value is zero,”

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ckastner
> The tech conglomerate has poured more than $13.5 billion into WeWork

So the potential downside is still even larger.

Seeing as WeWork needs to continue to pay their long-term leases, 2020 is not
going to look good for them thanks to Covid-19.

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leowoo91
If the main lose is on the leases, isn't that where corporate lawyers involve
or foresee that kind of situations? Are they still paying all of the lease
during pandemic?

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M2Ys4U
Victoria's Secret managed to put a "you must continue paying even if there's a
pandemic" clause in a contract signed _in February_ so... it wouldn't surprise
me if We Work still had to pay rent given how well (read: not well) the
company is run.

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exhilaration
Can you give us a link to a story about this? I'm curious to see how (some)
companies planned for the economic downturn.

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perl4ever
It was mentioned in Matt Levine's columns of the 23rd and 24th. Unfortunately,
I assume those are behind Bloomberg's paywall. Here is a quote from L Brands
courtesy of Levine:

"Sycamore ignores a fundamental problem with its apparent case of buyer’s
remorse: At the time the parties negotiated the Agreement, the world was
already well aware of the existence of COVID-19, and the parties agreed that
Sycamore would bear the risk of any adverse impacts stemming from such a
pandemic. … Sycamore and its representatives may wish that the world did not
have to face the pandemic that now confronts us, and may regret that they did
not negotiate the allocation of pandemic risk differently in the Transaction
Agreement. But having made that commercial choice, Sycamore must now live by
it."

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adreamingsoul
"A billion here, a billion there, pretty soon, you're talking real money." \--
Everett Dirksen

~~~
samizdis
There is dispute as to whether Dirksen said that [1]. According to Wikiquote,
when asked whether he had said it, Dirksen said: "Oh, I never said that. A
newspaper fella misquoted me once, and I thought it sounded so good that I
never bothered to deny it."

[1]
[https://en.wikiquote.org/wiki/Everett_Dirksen#Misattributed](https://en.wikiquote.org/wiki/Everett_Dirksen#Misattributed)

~~~
adreamingsoul
Fascinating! thanks for sharing.

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lefstathiou
I wonder if Japanese tax laws are similar to the US in that they incentivize
write downs to create net operating losses to offset future profit. For
SoftBank, which operates a very profitable core business, losses here could
ensure no tax payments for years to come. This happened in 08 with many of the
fire sales in the mortgage and banking business.

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_pmf_
I'm starting to believe this is some plot to disenfranchise the Saudis,
because the dimensions are too large for plain stupidity.

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TheOtherHobbes
The Saudis are perfectly capable of organic home-grown stupidity.

MBS has an impressive record of investment failures. It's possible he's part
of a secret plot to destabilise the entire region and bring the reign of the
House of Saud to an end, but it's just as likely he's a privileged playboy
fool who has no idea what he's doing.

~~~
Ididntdothis
“Don’t explain with malice what can be explained with stupidity “.

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nutshell89
I'm curious as to how this might impact other Vision Fund companies like
Fanatics or Mapbox.

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shadowpawn
I do miss the free beer and wine at my local WeWorks from 1500 each work day
:-(

