
SoftBank Backs Away from Part of Planned WeWork Bailout - GuardLlama
https://www.wsj.com/articles/softbank-backs-away-from-part-of-planned-wework-bailout-11584479235
======
jazzkingrt
Great timing! Current conditions are WeWork's nightmare scenario.

WeWork's raison-d'etre is short term leasing. Leaseholders will end those
leases if everyone is working from home. Add to that that an economic
recession was always going to be the real test of WeWork's ability to keep up
with its huge long-term leases.

~~~
sjtgraham
Arguably it's in the interest of the landlords to make this work. If WeWork
goes under there will be a ton of void commercial space. It's a question of
how many lease payments to forgive before it makes sense (and is actually
viable) to repossess the buildings and replacement tenants.

~~~
swiley
There’s going to be a _lot_ of empty space.

The land owners did it to themselves pushing for tighter building codes and
zoning. No one built, rent went up, the economy got more fragile because
people on the bottom had absolutely nowhere to go. Now they’re going to pay
for it (except the ones that saw this coming, I know the building I live in
just got sold a few days ago...)

I’ve been saying for years that the housing market is irrational and that most
of the US should be building more. Not that my opinion means anything but I
also wasn’t the only person saying this.

~~~
redis_mlc
This thread is about commercial real estate, not residential. And certainly
not about your apartment building.

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robertkrahn01
I really liked the "WeCrashed" podcast [1,2], it traces the rise and fall of
WeWork and is well produced.

[1] [https://podcasts.apple.com/podcast/wecrashed-the-rise-and-
fa...](https://podcasts.apple.com/podcast/wecrashed-the-rise-and-fall-of-
wework/id1494781373)

[2] [https://wondery.com/shows/we-crashed/](https://wondery.com/shows/we-
crashed/)

~~~
anonymouswacker
It is definitely worth a listen. Short episodes and very good story.

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nostromo
> A notice sent to WeWork shareholders Tuesday said that SoftBank believes
> regulatory probes into the startup’s business [...] give it an out under the
> deal struck last fall to purchase $3 billion of WeWork shares from existing
> investors.

> That will include Adam Neumann, former chief executive of WeWork parent We
> Co., who had the right to sell up to $970 million in stock as part of the
> October deal that led to his ouster from the company’s board.

Wow.

~~~
gxqoz
I'm having a hard time following these two paragraphs. Is it saying that
SoftBank invested $3 billion into WeWork which, among other things, funded
Neumann's $970 million exit? And they now think they can recover that $3
billion and then deprive Neumann of at least some of that $970 million?

~~~
x0x0
Softbank invested $1.5b, loaned up to $5b, and agreed to purchase $3b from
existing shareholders. The last is apparently being... renogotiated.

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gbronner
This one is sure to wind up in Matt Levine's column tomorrow.

The current owners of a large chunk of WeWork stock are going to have to sue
Softbank to force them to complete the deal. For all we know, Softbank is
experiencing liquidity problems, and would rather welsh on their portfolio
company principals than endanger their own investors.

I'm curious what Adam will finally get after all of this, other than an
incredible ride.

~~~
kevin_thibedeau
He still has a wave pool.

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Animats
_" The development won’t affect the $5 billion lifeline SoftBank agreed to
give WeWork directly—cash the startup badly needed then as it ran out of
runway, and which it is likely to continue to need as the worsening
coronavirus outbreak empties out its desks."_

Er, yes. WeWork is dead until there is a COVID-19 vaccine. Tightly packing
random people is out for now.

~~~
godzillabrennus
Largest corporate tenant in New York City.

We are just starting to see the first wave of this crash.

~~~
wayoutthere
Even after we start to recover; how many companies are going to keep as much
floor space as they had before? Remote work is here to stay.

This is going to turn into a global commercial real estate crash in 6 months,
no doubt.

~~~
toomuchtodo
Fantastic. Finally some sanity about disintermediating work from locality.

Sidenote: Carl Icahn is currently shorting commercial RE, so I think you're
right.

~~~
wayoutthere
Paradoxically, I think that the post-crash recovery will be a great
opportunity for WeWork (if they survive). My guess is that many companies will
outright close most of their branch offices, shifting people / teams that want
or need to be in an office to coworking spaces.

This movement will also have reductive effects on carbon emissions, so despite
the coming carnage in commercial real estate, it's the right direction.
Hopefully a lot of that square footage can be converted to residential,
because there is still an affordable housing shortage...

~~~
toomuchtodo
If you can work from anywhere, that helps alleviate the affordable housing
shortage. Move where the housing is cheap. Not everyone is going to get to
live in Manhattan or SF proper.

~~~
wayoutthere
This may be somewhat cynical, but housing policy in the US continues to be one
of the main tools in systemic oppression of minorities. There are powerful
segments of the population who are fine with the status quo and will not be
happy if "they" move in next door. So they will do everything they can to
"keep property values high" in suburban neighborhoods -- which has
historically been a dog whistle for "keep minorities out" \-- and in direct
opposition to creating more affordable housing.

~~~
toomuchtodo
It'll take decades to "fix" housing policy through upzoning and waiting for
the existing population of homeowners to shrink (freeing up housing stock). I
don't disagree that there are challenges due to the status quo, but remote
work is a fix that can be implemented today and can help lift the wages of
folks who might not otherwise be able to have those roles.

You're not going to be able to change property rights in the US, so the
problem may be unfixable to be frank, and those property rights are what keeps
property values high.

~~~
wayoutthere
I agree remote work is the right way to go, but the affordable housing crisis
can't be fixed through any other method than "build more housing". Every other
thing that people propose is designed to protect property value by _not_
building more housing. We simply have to make housing less scarce and yes,
that will drive down property value. That's kind of the point.

~~~
toomuchtodo
Right, but until you have the ability to upzone or “build more”, it’s a moot
point.

If you don’t own the land, and you can’t push through upzoning legislation,
you’re not building more housing.

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streetcat1
If it's not in your bank account, it does not exist.

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JumpCrisscross
> _The development won’t affect the $5 billion lifeline SoftBank agreed to
> give WeWork directly—cash the startup badly needed then as it ran out of
> runway, and which it is likely to continue to need as the worsening
> coronavirus outbreak empties out its desks.

Some of that money, including $1.5 billion in fresh equity, already has been
invested._

Still extending and pretending?

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pl0x
WeWork has been screwing members who try to leave out of their security
deposit. Could this be why?

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neonate
[https://archive.md/uRXE6](https://archive.md/uRXE6)

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sjtgraham
SoftBank is finished as a VC investor. You'd have to be an idiot or have no
other option (adverse selection) to take their money.

~~~
jakearmitage
lol. What makes you think that?

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cnst
A non-paywall source: [http://archive.is/uRXE6](http://archive.is/uRXE6).

This doesn't seem to have any effects for anyone other than investors; so,
this is probably not really relevant for HN as there's hardly anything in the
story for us to discuss.

~~~
tanseydavid
I consider this article "something that gratifies my intellectual curiosity."

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gamesetmath
Good. Let that PoS burn.

~~~
aerosmile
It's one thing to be mad at the founder, directors and officers. It's another
thing to take away a very useful tool from the startup toolkit that millions
of people find very helpful when starting a company. Having experienced the
process of renting and furnishing a 2-4 person office before and after the
rise of WeWork, I, for one, hope that they will stick around.

~~~
reitzensteinm
WeWork's advantage over other similar coworking places in large part came from
their ability to burn investor cash to provide you with a premium experience.

I don't want WeWork to die, it would be better for it to figure out how to run
in a sustainable manner. But once that happens, you may well find it's no
longer differentiated from its many competitors.

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buboard
but it's too big to fail

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zozimus
Thanks for your helpfulness, and many people other than investors will also
read this as well

