
SoftBank’s WeWork Bailout Draws Investor Concern - JumpCrisscross
https://www.wsj.com/articles/softbanks-wework-bailout-draws-investor-concern-11572086091?mod=rsswn
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JumpCrisscross
> _SoftBank had told investors and credit-rating companies that it planned to
> make big investments principally from the Vision Fund, not its own balance
> sheet. It said that except for the capital that the group had contributed,
> it wouldn’t be on the hook for any losses in the fund.

The WeWork bailout throws that fundamental premise into question and makes it
harder to calculate SoftBank’s liabilities and obligations, said a person who
watches the credit markets closely._

This looks bad both ways. From a SoftBank investor's perspective, Masa is
bailing out the Saudis. From a Vision Fund investor's perspective, SoftBank is
buying for $8 billion what the former were sold at $47.

~~~
tahdig
> Masa is bailing out the Saudis.

Can you elaborate? genuinely interested to understand, isn't he investing more
Saudi money in potentially doomed unicorn?

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ecf
The Saudi empire is built on oil, which won’t last forever. They are
desperately trying to diversify by throwing money at bad ideas in a way that
makes VCs look like toddlers playing with Monopoly money.

Eventually, a lot of those fail and the Saudis want their money back.

~~~
mschuster91
> Eventually, a lot of those fail and the Saudis want their money back

I'd wager that in 20 years the Saudi regime doesn't exist anymore,
Softbank/Vision Fund or not. They're going to crash _hard_ , the youth
worldwide does not want dictatorships and theocracies any more and the old
guards are literally dying off.

Besides, the Saudis (and other Gulf states) have lost more money to way
stupider efforts than wework, for their scale wework is chump change.

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NelsonMinar
This article talks a lot about how the failure of WeWork's IPO might cause
serious trouble for SoftBank. Not just the Venture Fund; all of SoftBank. Wow,
talk about contagion.

~~~
Aperocky
Softbank has been basically existing off the one bet that they made back in
2000. They still own 1/3 of Alibaba

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RoyTyrell
I'm no expert in real estate, residential or commercial, so I don't really see
the big appeal of WeWork. Are there that many independent contractors and very
small companies that _need_ office space, currently don't have it, and would
otherwise work at home?

I can see renting out some space for an afternoon, a full day, or even up to a
week if you're needing to meet with clients, but WeWork seems to be banking on
very small teams that have no where else to work. Their spaces look nice but
again unless you're really meeting with clients it seems like office space
like they provide is largely a waste of money.

Obviously there's something I'm missing because Softbank feels different.

~~~
throwaway69173
In short, yes. Some companies also feel it’s a good idea to house their tech
workers in a cooler trendy wework unlike the rest of their employees. But the
price is pretty key. At reasonable prices for what they’re offering, quantity
demanded would probably go down

~~~
skookum
I don't think cooler/trendier is the reason major companies with established
long-term offices use WeWork. I spent a few months in a WeWork office - which
was more uncomfortable than it was cool or trendy - as an employee of such a
company and the reason was mundane: needing temporary space for a subset of
the workforce during an office remodel. I'd wager for most big name clients
the draw is the short-term/low-commitment nature of the offering rather than
cooler trendiness of Class C office space that's been tarted up with a thin
layer of Silicon Valley chic.

~~~
perl4ever
Well, other companies provide short term rentals. It's probably more the
investor subsidized pricing.

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neonate
[http://archive.is/ibv4f](http://archive.is/ibv4f)

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dajohnson89
is it a bailout? I thought it was a thinly vieled takeover.

~~~
ineedasername
Kind of both. The takeover was necessary to preserve their investment and any
possibility of future gain: improved governance and pivot to profitability
instead of growth are the cornerstones of a better IPO valuation in a year's
time. In order to make it that year, they have to pump more money in. If they
can convince IPO investors in a year that it's a $20billion company by doing
so, they might approach break even territory.

~~~
perl4ever
$20B? That seems like at least one too many zeros.

My impression is their largest competitor is IWG plc, formerly Regus, which
has a market cap of around $4.5B or 1.3x sales. Applying that to WeWork I get
around $2-3B.

~~~
ineedasername
$20B is optimistic, but not outside the realm of possibility if they can show
revenue growth by filling the inventory they've been building, at the same
time they drastically curtail the cash burn needed to obtain still more
inventory. They're on track for a 50% increase in 2019 revenue over 2018
revenue, and if that growth continues into 2020, then an IPO in a year
wouldn't be completely unreasonable at 5x revenue on the basis of continued
revenue growth. Still a bit high for a traditional real estate company, but
they may still have some tech-adjacent mojo to prop it all up. It's a
longshot, but not impossible.

~~~
perl4ever
It seems unlikely to stop selling space at a loss while maintaining revenue
growth. After all, if they _can_ do that, why didn't they already?

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omarhaneef
Theory as to why this front page HN article has no comments so far: it is
behind a paywall.

I am not one to complain about paywalls myself but here is a similar article
that is not behind a paywall:

[https://mybroadband.co.za/news/business/324915-investors-
con...](https://mybroadband.co.za/news/business/324915-investors-concerned-
about-softbanks-debt.html)

~~~
pcurve
I sometimes wonder how many new subscribers NYT and WSJ got from HN. There are
quite a few posts linking to them. They're quite expensive for semi-casual
readers unfortunately.

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sgroppino
But how come they are usually upvoted so much to end up in the top 10?

~~~
GauntletWizard
Becaues NYT and WSJ are the still the top names in news, and most people who
want to be informed have some form of subscription to them.

