
WeWork chases new financing as cash crunch looms - paulsutter
https://www.ft.com/content/f29ecc58-eba9-11e9-a240-3b065ef5fc55
======
raiyu
This could be the best situation for Softbank. WeWork is obviously in
desparate need of cash, no one is going to touch it with a ten foot pole.
Softbank is too invested for it to fail. They can buy up 50% of the equity
remaining for any sort of investment since they will have a gun to their head
the company will have to accept or go bankrupt. Adam Neumann's shares will
become worthless in the process and new shares will be issued for the new co-
CEOs.

So with $11B in capital committed to WeWork at the end of the whole mess
Softbank can end up with 90% ownership. Get the company on track financially
and see if they can bring it to an IPO in the next 2-3 years when they have
solved their financial issues. And hopefully realize some sort of return, or
at the very least not leave a $9B hole in their vision fund.

~~~
atdrummond
He already ferreted away $700m. He'll be fine.

~~~
fjp
And then borrowed $300-some million secured against his WeWork shares

~~~
api
I just did some work to get together info for an investor due diligence
questionnaire and I LOLed when I came to a long series of questions at the end
that I swear were an itemized list of all the shenanigans that went on at
WeWork. Loans of that sort were one of the items.

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cgh
I don’t understand how this company employed 1500+ programmers, PMs and data
science people. What did they do? I guess not much, as 500 of them got laid
off recently.

~~~
EpicEng
>What did they do?

My guess would be 'very little', though I have no facts to back that up. It's
just a staggering number given what the company does.

I've worked at a place like this. The job was as easy as it was cushy. Two
week sprint plans could be completed in literally 3-4 days... but they just
kept on hiring. I often heard the word "growth", but I have no idea as to why
their interpretation of the word was desirable.

In contrast, I have also worked at two sucessful biotech companies. At the
first we developed automated microscopy systems used by pathologists, as well
as image viewing/analysis applications and your typical data management type
interfaces. I worked on the scanner/image processing team. We were a team of
six, three of which were software devs. The other software team (the data
management / viewing stuff) had about eleven people. We were the most
successful company in our domain, and our competition was the likes of Zeiss
and Hamamatsu (one of which later purchased us.)

At my next company we successfully released a prognostic test for late stage
colon cancer using CTC's found in the blood stream. In the course of doing so
we had to write all sorts of integrations on top of an image viewing
application, reporting systems, and the core bits (scanning + image analysis +
local data management + R&D tooling.) We had a team of ~4 devs over a three
year period.

When I read about stuff like this I'm just mystified.

~~~
codesushi42
People like easy money. Anyone with ambition, opportunity, talent and
foresight would likely have left We after a month and never looked back.

~~~
jermaustin1
Or they used their cushy job, high salary, and low expected work output as a
nice way to fund and work their side projects. If you leave work energized
from not doing much, you have plenty of energy to burn off building something.

I know plenty of ambitious and talented developers who work at menial jobs to
cash a paycheck and pay for their side projects.

~~~
codesushi42
Huh? What do your acquaintances do then for 8 hours, sleep?

~~~
jermaustin1
Get to work at 9-10am. Work slowly doing trivial things. Eat long lunches. Go
to the gym. Leave by 5pm. Get home by 6pm, and have the energy to get back on
the computer.

Where as I have absolutely no desire to look at a computer when I GET to work,
let alone after work.

~~~
codesushi42
Sounds like a FAANG.

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josephjrobison
Interesting that Goldman Sachs pumped up their valuation to $60-90 billion at
one point, but now won’t give them a lifeline:

“ Goldman Sachs, one of WeWork’s investors, advisers and customers, had been
among a consortium of banks willing to lend $6bn had the IPO succeeded but has
so far sat out the new financing discussions out of concern about the level of
uncertainty surrounding the company, one person said.”

~~~
jiofih
My first thought was related to this: hhow is it possible that one moment the
company is ready for an IPO, with all the due diligence that comes with it and
backing of financial giants, and then next month be desperate for cash? Isn’t
there some sort of fraud going on in this situation?

~~~
jartelt
The company believed it was ready for an IPO, but all the potential IPO
investors disagreed after reading the S-1 and doing some diligence. In a sense
the system worked well in that regard.

The big issue was with the private investors letting the CEO do whatever he
wanted and pushing the valuation up very high.

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lordnacho
Perhaps someone in the property business can illuminate something for me.

I read somewhere that WeWork runs each site as a separate business. Can this
really be true? It would seem to allow them to let each entity go bankrupt,
which doesn't seem to be a sensible thing for the landlord to want to expose
himself to. Sure he gets the building back, but you'd think there's then no
advantage to renting it out to WeWork, since despite being a large entity they
can just default on you anyway?

~~~
jbigelow76
I did some consulting once for a company that managed rooftop space for
building operators to lease to telcos and what not and it was totally normal
one company to "own" multiple buildings but for each building to be its own
LLC.

~~~
mchristen
This seems to be a common practice. My parents live in a highrise that has
construction defects and it took years to extract money to repair the building
because the LLC that sold the building to the condo association had no cash or
assets anymore.

~~~
markstos
My accountant advised our business to setup a separate business to own the
building we wanted to buy. It silos the liabilities of each. Also, you have
some flexibility in how much you charge yourself for rent. Depending on which
company might owe more taxes, you may want to adjust that rate up and down. In
our case, the property business outlived the primary business turned out to be
another benefit of decoupling them.

~~~
Cd00d
Liabilities makes sense. I used to be at a remote sensing company that was
leasing a plane and when we were close to buying instead the CFO said, we need
to start a new company for the liabilities.

~~~
heavenlyblue
To be fair (not blaming you here), but this seems incredibly dodgy.

This is essentially the monopolisation of the market on multiple fronts
without any of the consequences to you as a business.

For example, you are taking away business from renters who could be making
money on rent but also spending that money keeping the buildings safe.

Not as sure this should be legal, let’s say.

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joshstrange
Does anyone here on HN use WeWork spaces and enjoy them? I'm not suggesting
they are bad, I honestly don't know.

Ignoring the business model, the CEO, the failed IPO, do YOU or do you not
enjoy that actual offering of WeWork?

~~~
rrdharan
Turns out most of us enjoy any exchange in which we receive goods whose value
far exceeds what we pay for them.

Same reason I love cheap ride share trips[1] and NYC ferry rides[2]. I'd
probably really enjoy winning the mega millions jackpot with a $5 ticket too
(though perhaps not? [3]).

[1] [https://www.vice.com/en_us/article/zmjew8/were-all-
killing-u...](https://www.vice.com/en_us/article/zmjew8/were-all-killing-uber-
just-by-using-it)

[2] [https://ny.curbed.com/2019/3/28/18285731/nyc-ferry-
swimming-...](https://ny.curbed.com/2019/3/28/18285731/nyc-ferry-swimming-in-
subsidies-mayor-de-blasio)

[3] [https://time.com/4176128/powerball-jackpot-lottery-
winners/](https://time.com/4176128/powerball-jackpot-lottery-winners/)

~~~
sasper
WeWork is the most expensive option in our city for managed offices, by a
large margin. It's not cheap.

~~~
bpt3
Have you tried to negotiate? If they have any competitors, they'll beat those
prices just by asking in my experience.

~~~
sasper
Yes we negotiated, received discounts, and have a dedicated person working our
account since we're growing into new countries and adding lots of offices.

It's still much more expensive than the competition (and absolutely worth the
increased expense).

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tibbydudeza
Such a shame ... time to pony up some more of that "vision" Softbank.

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achow
In the other news..

WeWork India looks to raise $200 million

[https://www.livemint.com/companies/news/wework-india-to-
rais...](https://www.livemint.com/companies/news/wework-india-to-
raise-200-million-to-fuel-growth-11570706101176.html)

 _Unlike other Asian markets such as China and Japan, We Co. operates on a
revenue and profit-sharing model with its Indian partner...3 years ago it
entered the country through a brand franchise agreement._

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Pwntastic
non-paywalled link: [http://archive.is/g1g6E](http://archive.is/g1g6E)

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cmarschner
Just as a datapoint - Wework‘s largest competitor IWG has 4x as many
locations, makes 3 billion $ revenue and $150 million profit. Not really where
a tech company would want to be. Its market cap is at around 4 billion. What
is different for Wework that would warrant a higher valuation other than the
clout of its founder and, arguably, much nicer offices?

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WomanCanCode
I don't understand the WeWork business model. Landlords are all around you.
Companies sometimes prefer to own a property rather than lease because over
the time, you only lose money renting. Explain pls, how is WeWork different
than all the other commercial landlords?

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neonate
[http://archive.is/g1g6E](http://archive.is/g1g6E)

~~~
camel_Snake
thank you

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jsnider3
No! Not the most magical unicorn!

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illender
well i mean they let an umbrella shut down an office for 2 days instead of
just breaking the window which would have cost less than days of being
shutdown, so are we surprised?

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acomjean
Whats going to happen with their meetup.com subsidiary?

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soup10
WeBankrupt

~~~
g96alqdm0x
WeOuttaWork

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xwdv
Can’t wait to see WeWork crumble. If they had done an IPO I was hoping to open
up a short position.

If WeWork does run out of cash, I’ll be pulling money out from my tech stocks
and holding cash for a while.

~~~
youngtaff
Don't understand your linkage to tech stocks…

WeWork are a property company

~~~
AgloeDreams
I think their comment is a little apocalyptic but I can say that wework going
under could possibly trigger a large number of mid-small-size startups losing
their spaces and possibly ending up out of business.

~~~
whatok
Startups aren't going out of business because they don't have a place to work
from. They'll go out of business when funding dries up because valuations are
in question now.

