
Troubles Mount for the We Company as Softbank Reportedly Calls for Shelving IPO - doppp
https://techcrunch.com/2019/09/09/troubles-keep-mounting-for-the-we-company-as-softbank-reportedly-calls-for-shelving-the-ipo/
======
save_ferris
Corporate governance for startups is such a joke sometimes, it’s unbelievable.
And investors bring it upon themselves.

You want sustained hockey stick growth, regardless of the cost to the team and
the business, no matter what? Then you’re gonna find some founders that are
much better at making the business look promising by hitting certain metrics
than actually building a solid operational foundation for the business.

~~~
nickpinkston
Though this happened at GE too over a long time with a traditional corp gov
structure.

I'm blanking on the tech company [1] that recently gave into the pro-
traditional corp gov people and gave up their super-voting shares, only for
Wall St. to start screwing them and the long-term of the company, which was
reported as a blow for the pro-trad corp gov people.

It's a hard call, but I think I'm still for close control by the founders.
Sure Elon might've promised too much and pushed Tesla too far, but if they put
in a former auto exec I suspect the company wouldn't be as far along as it is.

The SolarCity acquisition OTOH seems like Elon taking a bonus for himself and
having the power (via his votes, but also who he is for the company /
execution) to make the board go along with it.

I suspect Neumann's investors are in too deep to challenge his craziness
(sound like anyone else?) but the market rightly smells bullshit.

[1] I heard about it on Pro Rata the other day.

------
reilly3000
Buying that stock would be akin to donating to a "Help Adam Neumann Buy Real
Estate" GoFundMe campaign.

~~~
disillusioned
He at least had the good sense to "allow" them to use "his" WE trademark
without having to pay the $15M annual fee anymore!

~~~
v77
Bloomberg mentioned that Neumann probably cost himself tens, if not hundreds,
of millions of dollars because of the huge negative impact of that clause,
given that most of his wealth is tied up in WeWork stock. And then he ended up
cancelling the deal anyways.

------
wastedhours
We must be pretty important for Softbank as a signal - even if they didn't
believe in the company, allowing such a major investment take such a big hit
would be rather bad. Worth them pouring a few $bn more in instead of an IPO,
if only to shore up faith in the rest of their portfolio?

All that being said, someone needs to be mentoring the CEO, like right now.
That S1 was... not... great.

~~~
navigatesol
> _Worth them pouring a few $bn more in instead of an IPO, if only to shore up
> faith in the rest of their portfolio?_

I'd love to know how throwing good money after bad would shore up the faith in
the rest of the portfolio?

"No one else wants this, but we can't afford to mark-to-market, so we're going
to throw more money in with the hopes of maintaining an illusory valuation."

At the end of the day, it's a bad business. Can't fake your way out of it.

~~~
heymijo
Softbank has over $10 billion of its $100 billion Vision Fund invested in
WeWork.

That's a hell of a big bet. It's not hard to imagine Softbank will do whatever
it can, rational or not, to try to get WeWork to a point where they can cash
out.

~~~
tomatocracy
Yes. It’s a pretty common conflict of interest between the manager of the fund
(which has a strong incentive to raise new fund while they can as quickly as
possible so will want to prop up any losers until the current round of
fundraising is complete) and the investors in the fund (who may or may not
also be invested in the manager itself).

------
jbob2000
We're going to look back on this company and say to ourselves "why did we fund
a company to sign rental agreements".

I jest, but WeWork is one of those strange entities that's greater than the
sum of its parts. If the magic goes or the brand tarnishes a little, then the
whole thing goes poof.

~~~
mschuster91
> We're going to look back on this company and say to ourselves "why did we
> fund a company to sign rental agreements".

Because there is just too much dumb money floating around and waiting to be
invested after a decade of QE monetary policy. But instead of governments
(worldwide) using said dumb money to invest in their future e.g. by building
(or even maintaining!) infrastructure, teaching young students, fixing up
environmental issues or helping people rebuild their savings/retirement, the
money is forced into such "investments".

Next recession is gonna hit hard.

~~~
lotsofpulp
All of the options you listed would result in wealth redistribution. Asset
value inflation and collecting rent are how you maintain or increase the
wealth/income gap, not giving away your money to make other people’s lives
better/productive.

~~~
jakobegger
Yes, it'll make investors richer, but they'll end up in a world that nobody
likes to live in.

------
ngngngng
This was going to be my first short, shame.

~~~
hdpq
if you could get your hands on the stock, which would have been fairly
unlikely.

~~~
buttcoinslol
You can create a synthetic short with options, no need to borrow any stock at
all.

~~~
mrfredward
With so many people wanting to bet against it though, those put options would
end up mighty expensive.

~~~
prepend
That’s the whole point. Shorting at the right time is similar to buying puts
while still compatible with your model.

------
tempsy
I'm looking through some other SoftBank investments. My guess is that
Brandless, Wag (dog walking), Clutter (moving), and DoorDash are all in
similar positions of having raised too much money.

~~~
navigatesol
> _I 'm looking through some other SoftBank investments_

Uber as well, although it actually has a solid brand and a useful product.
However, the fund is underwater on their investment too, which adds pressure.

------
nemo44x
Evidence we are not in a bubble and that markets are mostly sane currently.

~~~
dboreham
I came here to post the opposite: cancellation of frothy IPOs is a good sign
of a coming downturn, isn't it?

~~~
mikestew
The market currently appears to be saying, “ya know, if we were in a bubble, I
might buy your stinky shit. But because we’re not in a bubble, and I have no
great FOMO, I’m going to take a pass on your stinky turd of an IPO.”

Another way of looking at it, anyway. I have no insight one way or the other.

~~~
r00fus
That's because WeWork is obviously bad. But what about other, not so obvious
bad-bets?

------
ht85
Tangential, but does anyone else find techcrunch UX absolutely dreadful on
desktop?

~~~
inetknght
I just prepend `about:reader?url=` to any TechCrunch URL and never have to
deal with their dreadful UI

~~~
cpach
Which browser is that? :)

~~~
nvrspyx
I assume Firefox.

~~~
inetknght
You assume correctly.

------
t0astbread
So is this company's business just selling baseless promises to investors? If
yes, how did they bootstrap this?

~~~
kgc
You may have answered your own question.

~~~
t0astbread
Yeah but I can't just go to an investor and say "we rent out offices" (in a
fancy way) "but we're worth billions" and actually get billions... or can I?

~~~
beager
Not with that attitude, you can't.

------
Traster
I've got to say I think this is a really bearish sign for Softbank. Softbank
is meant to be so big that it can pick winners and buy shares of entire
markets so they can own the future returns of all these tech companies. One of
the big advantages of Softbank was meant to be that if you have softbank money
you are going to win through capital spend and expansion.

But the fact that Softbank _can 't_ walk away from We seems to indicate that
they actually are a lot more sensitive to the market than they claim to be. It
really changes the dynamic if Softbank can't afford to hold all these
companies when the next recession comes. You don't want to be a Softbank owned
company during _that_ fire sale.

~~~
perl4ever
This seems vaguely like a martingale betting system.

------
dreamcompiler
It only took 19 years, but we finally have the next pets.com. What will we
call this era? Dotcom Bubble II?

~~~
bognition
except WeWork has absolutely nothing to do with being a tech company

~~~
delfinom
They got invested into by the same investors all the same. It's the only
reason why they are being thrown into the mix of "tech companies" and what
puts the rest of the tech bubble in trouble. SoftBank themselves are a
hilarious joke. Over half of corporate debt in Japan....is held by SoftBank.

------
edmoffo
It's so sad to see it all happening, after we all have been celebrating their
success ...

------
roland35
I think at this point it would be surprising if there was GOOD news about We!
It just seems to be one thing after another.

~~~
buboard
well this is good news?

------
tomp
I know most HN readers look down upon the site, but I really like Zero Hedge's
take on this.

[https://www.zerohedge.com/news/2019-09-09/2-letters-20-billi...](https://www.zerohedge.com/news/2019-09-09/2-letters-20-billion-
lost)

 _> Super-voting stock – Zuck did that and it worked out in the end

> Accelerating losses – Look at all that revenue growth

> Zero possibility of profits – Hasn’t mattered for years

> Convoluted insider dealings on property leases – Property GPs always double
> dip somehow

> Sold the pronoun “WE” to the company – That man is a crook!!_

~~~
stanfordkid
ZeroHedge is the type of site that will quickly be labelled alt-right, fake
news etc. in reality they tend to just interpret events in much more extreme
ways but still rely on largely factual sources. I find the commentary to be
much more thought provoking than consensus outlets. Glad to see some fellow
HN'ers peruse the site.

~~~
calcifer
Quite right, like this [1] 100% factual not at all bullshit scientifically
sound article on climate change. Thought provoking indeed.

[1][https://www.zerohedge.com/news/2019-09-05/5-surprising-
scien...](https://www.zerohedge.com/news/2019-09-05/5-surprising-scientific-
facts-about-earths-climate)

~~~
setr
..? I’m not seeing anything on that page that isn’t based on “facts”, and none
of it seems obviously incorrect..

~~~
graeme
It says co2 doesn't impact temperature:

"While most of the current climatologists who collaborate with the United
Nations believe anthropogenic CO2 emissions have exacerbated natural warming
in recent decades, there is no empirical proof to support their claim. The
only way to test it would be to wait and see if their assumptions come true.

The entire climate fraternity was in for a surprise when global temperature
between 2000 and 2016 failed to rise as anticipated by the climate alarmists.
The scientists assumed that rising CO2 emissions from human activity would
result in a rapid rise in temperature, but they didn’t.

This proved that atmospheric CO2 concentrations are not the primary factor
controlling global temperature. Consideration of a much longer period (10,000
or more years) suggests that CO2 had no significant role to play in
temperature increases. CO2 never was the temperature control knob."

~~~
stanfordkid
The thing with ZeroHedge is that you will see an article like this alongside
another one like this: [https://www.zerohedge.com/health/temperatures-pacific-
ocean-...](https://www.zerohedge.com/health/temperatures-pacific-ocean-have-
shot-dangerous-levels-and-scientists-are-blaming-strange)

It is in aggregate an _extreme_ blog with narratives that are non-consensus.
So, yes, climate denial fits in that box, but it will also have articles on
climate apocalypse. In aggregate I find it to be fairly eye-opening and bring
to light ideas that are forgotten by mainstream media. It also has a healthy
disregard for any form of consensus reality or authority.

Furthermore, in the _very_ article you linked there is a link to a NATURE
commentary:
[https://www.nature.com/articles/nclimate2938.epdf](https://www.nature.com/articles/nclimate2938.epdf)

Of course, we should leave it to experts to interpret a scientific paper such
as this one, but my perception is that reporters do not always get it right.
In all of the NYTimes you just hear the consensus from organizations such as
the UN, I have yet to see an interview with an author of a paper such as the
one mentioned above.

~~~
graeme
Ironically this seems a good case of gelman amnesia. If you think he's wrong
on climate (a MAJOR thing to be wrong about), why would you trust his opinion
on subjects where you know less?

\------

I didn't link the article, I just reply to the comment asking what was wrong.
But he's very much wrong and that nature article doesn't support him. He said
CO2 did not lead to a rise in temperature. That article says there was a lower
than expected rise in temperature - it's still rose!

He said co2 has no significant impact on temperature which is definitely not
what that paper is saying. They refer to co2 as anthropogenic forcing.

Full text is here:
[http://www.meteo.psu.edu/holocene/public_html/Mann/articles/...](http://www.meteo.psu.edu/holocene/public_html/Mann/articles/articles/FyfeEtAlNatureClimate16.pdf)

------
stewy85
I fail to see how this company could survive a recession. The first thing
companies do during a recession is reduce their headcount. Less headcount
means less desks required.

~~~
jeltz
Many of their competitors have survived recessions just fine. You just have to
either be diversified or have enough cash reserves. The issue is mostly that
WeWork has too high costs and a too high valuation.

~~~
generatorguy
Their competitors have long term leases with the tenants that we doesn’t have.

------
19ylram49
It’s been quite hilarious for me watching this saga unfold. All I needed to
hear was that this man literally took out loans from WeWork and used the
proceeds of the loans to purchase real estate that he then leased back to
WeWork. Lol!

~~~
paulie_a
Genuine question: is that legal? That seems incredibly shady.

~~~
braythwayt
Imagine you are a bank or investment firm or hedge fund or VC. You want to do
business with person A, I shall call them “Alice.”

Alice says to you, right up front, “I need to make one billion dollars, or I
look for a different partner.”

Are you going to accuse Alice of being greedy, when your entire business
consists of making money? You don’t cure the sick, or bring the Internet to
rural communities, or manufacture safe transportation, or serve healthy food.
You just make money.

So you say, “Fine, Alice, but a billion dollars is a lot of money.” Alice
says, “How much do you need to make, such that my dream can come true?”

So you work out how you can make ten billion, while Alice makes one billion.

Now the conversation becomes, “How does Alice take her one billion out of the
business, tweaking the knobs for risk, tax advantage, estate planning, and so
forth?”

You bought into Alice making a billion dollars, so everything else is just
details about when she gets the various bits of her billion.

~~~
CPLX
Sure, but it makes a difference whether that billion comes from returns on
productive investment, or from the actual investor money itself. One of those
makes you Warren Buffet, the other makes you Bernie Madoff.

------
patthebunny
I don't think they go public until they sort out the financials and get rid of
the stench of blatant corruption.

------
JaimeThompson
Not sure how much one can trust a site that thinks nuclear weapons aren't
real.

[https://www.zerohedge.com/news/2016-08-06/atom-bomb-
annivers...](https://www.zerohedge.com/news/2016-08-06/atom-bomb-anniversary-
youre-being-lied-about-hiroshima-and-much-more)

"The attacks on Hiroshima and Nagasaki were horrible and tragic. But whether
they were results of “atom” bombs (certainly in the sense that people
understand them today) is at least seriously questionable."

~~~
dang
We detached this subthread from
[https://news.ycombinator.com/item?id=20926837](https://news.ycombinator.com/item?id=20926837)
and marked it off-topic.

~~~
JaimeThompson
While it is your call to make and I respect that I posted it because it does
help demonstrate that the source of this article is prone to conspiracy
thinking and doesn't always do the necessary research to support their
conclusions.

------
YeahSureWhyNot
fun times ahead

