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WeWork: overhyped, overvalued

Puppycow

Penultimate Amazing
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It's a company that essentially rents out office space. Not exactly a unique idea or something that others can't do just as easily.
It isn't profitable yet. I guess the one thing they could say was that their revenue growth was fast, but that can't go on forever.

The WeWork mess, explained

WeWork, the coworking unicorn startup whose IPO has been one of the most highly anticipated public offerings of 2019, has been imploding in recent weeks.

The company, which was about to begin its roadshow to get public investors interested in buying its shares, postponed its IPO last week in a highly unusual move after investors have expressed concern about its business model and leadership structure. And now, reports indicate that some of the company’s board members, including officials representing SoftBank, its biggest investor, want to push out WeWork’s founder and CEO Adam Neumann.

In the months and even years leading up to WeWork’s IPO push, concerns abounded about its massive losses, whether it’s really a tech company, and its hard-partying corporate culture. But investors seemed to be fine with WeWork’s many problems — until it registered to trade on the public markets. Suddenly the company’s insider dealings (like being both its own landlord and tenant), its track record of burning cash without a path to profitability, and reports of poor executive judgment seemed to become an issue.

The abrupt drop in WeWork’s valuation, to just a third of the $47 billion it had previously been valued at in a January funding round, probably had something to do with it. WeWork declined to comment to Recode on the matter. SoftBank did not immediately respond to a request for comment.

Here's the part that suggests it's kinda fraud-adjacent, and not merely over-hyped:
Poor corporate governance

WeWork’s corporate governance issues are myriad, and the company’s corporate structure is at the root of it all. Like many other tech companies that have recently gone public, WeWork has a multi-class stock structure that gives Neumann more power than the company’s other stockholders.

Neumann has been able to maintain control of WeWork because the Class B- and C shares he owns each had 20 votes to every one vote regular shareholders would get for their Class A shares. After a wave of criticism, WeWork amended its S-1 two weeks ago and limited Neumann’s super-voting shares to 10 votes for every one regular share’s voting power — but that’s still a high ratio.

This means it will be hard to get rid of Neumann if he doesn’t want to leave since his super votes still give him the power to fire the entire board. But if Neumann did get rid of his opponents on the board, he would run this risk of making WeWork look even more chaotic than it already is in the eyes of investors, threatening the outcome of an IPO. Neumann is reportedly in discussions to voluntarily give up his role as CEO, according to a Reuters.

Original company filings stated that if he died, his wife Rebekah, the co-founder and the chief brand and impact officer of WeWork, would have been charged with appointing a successor. The updates to WeWork’s S-1 changed that Game of Thrones scenario to one in which the WeWork board would be responsible for finding the next CEO in the event of Neumann’s death.

Rebekah is one of several family members employed at WeWork, including Neumann’s brother-in-law, who serves as its “head of wellness.”

Neumann’s board supremacy has allowed him to enact a number of nonstandard financial practices that many have viewed as a conflict of interest.

WeWork, which at its heart is a company that leases long-term office space in order to rent it to others in the short term, didn’t initially plan to own property. Not doing so saved it from larger expenses that would burden its already laden balance sheet. But earlier this year, the Wall Street Journal reported that Neumann was privately buying property that he then leased to WeWork. And at the same time, Neumann was borrowing money from WeWork at little to no interest. So the company was paying him rent while lending him money.

Responding in part to investors’ concerns, Neumann said he would transfer ownership of these buildings to the company’s real estate investment vehicle, ARK.

In a similar vein, WeWork paid Neumann nearly $6 million to change its name to “The We Company,” a trademark that Neumann owned. In the mea culpa/updated S-1, he gave that money back.

How WeWork is trying to justify its tech company valuation
“Space as a service” does not a software company make.
WeWork, which is officially known as the We Company, released paperwork to go public Wednesday. In it, the coworking company tried hard to defend its whopping $47 billion valuation, which is multiples larger than it would be worth if it were considered a real estate company like its main competitor IWG. What makes WeWork worth more, the company seems to be saying, is that it’s a tech company — meaning its innovation and flexibility make it better than a regular real estate company.

That’s a tough argument to make, given that for a long time, IWG has had substantially more square footage and more customers, and has actually made a profit — yet its market cap is just 8 percent of what SoftBank’s latest funding round thinks WeWork is worth.

WeWork’s filing shows it’s made some huge strides as far as its relative size to IWG, but that still doesn’t explain a valuation that’s more than 10 times higher. WeWork is operating at a huge loss, losing nearly $900 million in the first half of 2019, but it also doubled its revenue when compared with a year earlier.

Today’s release laid on the argument that it is a tech company — and by extension deserves its high price tag — very heavily. [highlight=yellow]WeWork used a version of the word “tech” 123 times in its public filing[/highlight]; that’s more than the video calling software company Zoom did in its 2019 IPO filing, but less than the ride-hailing app Uber did, which also had to contend with arguments that it is basically a taxi company.

At least it's not a public company yet.
 
In the months and even years leading up to WeWork’s IPO push, concerns abounded about its massive losses, whether it’s really a tech company, and its hard-partying corporate culture. But investors seemed to be fine with WeWork’s many problems
Hey, any (legal) way you can convince the fools to part with their money is fine, right?

They could have invested in a responsible business such as Tesla or Berkshire Hathaway, or just left their money in the bank. But they chose to 'invest' in a dubious company that is operating at a huge loss - so why should we care what happens to them?

Here's the part that suggests it's kinda fraud-adjacent, and not merely over-hyped:
Over-hyped? 'Fraud-adjacent'? Unless it's actually illegal I don't see the problem. The only real purpose of a business is to make money - and you get that by convincing others to give it to you. How you do it is just an implementation detail.


WeWork is operating at a huge loss, losing nearly $900 million in the first half of 2019, but it also doubled its revenue when compared with a year earlier.
So there you go, the business is making money, but it's running $900 million more efficiently than if it broke even! I bet their customers are happy with not being charged enough...
 
Hey, any (legal) way you can convince the fools to part with their money is fine, right?
That's not the way I personally see things.

They could have invested in a responsible business such as Tesla or Berkshire Hathaway, or just left their money in the bank. But they chose to 'invest' in a dubious company that is operating at a huge loss - so why should we care what happens to them?
On one level, sure. It's not our money after all, right? Why should we care even if they put it all in a pile and just set fire to it Joker-style? However, if you believe that there's an important role that financiers play in our economy by making investment decisions, there's actually an argument to be made that the role of finance is to allocate capital in the most efficient way, and that the more efficiently money is invested, the better it is for the economy as a whole, and by extension for all the rest of us who live in the economy and depend on it for our livelihood.*

Over-hyped? 'Fraud-adjacent'? Unless it's actually illegal I don't see the problem. The only real purpose of a business is to make money - and you get that by convincing others to give it to you. How you do it is just an implementation detail.
I sense sarcasm here and in the rest of your post as well, but clearly this is an overly simplistic lens to consider business in. We hope that the end result is to improve standards of living. Money itself is only a means to that end. It's the medium we use to exchange value, not the value itself. So if I make money by selling sham medicine that doesn't work for example, I would make money but not add any real value.

So there you go, the business is making money, but it's running $900 million more efficiently than if it broke even! I bet their customers are happy with not being charged enough...
So I take it that you are suggesting that the customers of WeWork are benefiting by receiving more value than they have to pay for? That might be true but there's no guarantee that they actually derive the utility from it that justifies the total cost. It's unlikely that it would.

* To simplify it conceptually, suppose that I am an investor with a finite amount of capital to invest in a company. Company A and Company B both want exactly the amount of money that I have to invest. I have to choose one and let the other other languish. There's no reason to expect that each investment option would lead to equal value creation unless by pure coincidence. If I choose correctly and make the best investment choice, then capital is allocated efficiently, but if not, then the result is suboptimal.
 
I think the underlying idea is sound. Take someone like my wife (please! :) ). She has started a cash based medical practice and she’d like to have offices in several nearby cities -San Antonio, Houston and Laredo- where she has potential to expand her practice. But it makes no sense for her to get into a long term traditional commercial lease. So it would be cool if there was a way for her to get on an app and say, “I’m going to be in in SA next month. I need 2 rooms and a reception area.” Then she can select “on-demand” space at a suitable price and send notices to her patients that she will be there.

Having said that, WeWork does not seem to be the company that’s going to deliver that.
 
I think the underlying idea is sound. Take someone like my wife (please! :) ). She has started a cash based medical practice and she’d like to have offices in several nearby cities -San Antonio, Houston and Laredo- where she has potential to expand her practice. But it makes no sense for her to get into a long term traditional commercial lease. So it would be cool if there was a way for her to get on an app and say, “I’m going to be in in SA next month. I need 2 rooms and a reception area.” Then she can select “on-demand” space at a suitable price and send notices to her patients that she will be there.

Having said that, WeWork does not seem to be the company that’s going to deliver that.


I don't think anybody can deliver that. Thanks to tenants' rights laws nationwide, evicting a tenant can be a months-long procedure with little or no way to recoup losses. And leases generally aren't allowed to circumvent that process. Any landlord-type organization is going to need hefty lines in its budget for legal fees and written-off lease charges (and debt service charges for those who they do pay a debt collector to go after).
 
They were advertising on the NFL this weekend, so that could be part of their burn rate. It sounds like they're offering little more than executive office suites. Hard to see how that equates to a multi-billion dollar company. They aren't anything new; I rented an office in one back in the 1980s.
 
I don't think anybody can deliver that. Thanks to tenants' rights laws nationwide, evicting a tenant can be a months-long procedure with little or no way to recoup losses. And leases generally aren't allowed to circumvent that process. Any landlord-type organization is going to need hefty lines in its budget for legal fees and written-off lease charges (and debt service charges for those who they do pay a debt collector to go after).

Is this analogous to a tenant-landlord relationship or a hotel-guest relationship?

I assume that hotel guests don't have the same rights as long-term tenants. I mean, it wouldn't require a lengthy legal process for a hotel to evict a guest, would it?
 
Is this analogous to a tenant-landlord relationship or a hotel-guest relationship?

I assume that hotel guests don't have the same rights as long-term tenants. I mean, it wouldn't require a lengthy legal process for a hotel to evict a guest, would it?


Length of stay is one factor. States vary, but in New York (a tenant-friendly state) it can be established without a written lease of any kind in 30 days. With a written lease, that time can go as low as a picosecond.

Other factors include the amount of control and privacy a guest/tenant has. In hotels, maids are always busting in and touching your stuff. The "landlord" is literally in there every single day. In your usual hands-off least, like WeWork provided, the landlord rarely, if ever, even shows up in person, let alone wanders in whenever he wants to. Long-term hotels that offer no cleaning, but are rent-by-the-week affairs, have traditionally had a very hard time staying on one or the other side of that line.

A hotel doesn't "evict" a guest, by the way. Landlords evict tenants. A hotel just throws a guest's stuff onto the street. Incidentally, the hotel cannot touch the person or create a loud scene in the process. That would be assault, battery, and breach of the peace. That's the advice I gave to the one hotel that called me during my practice -wait for the guy to leave, put all his stuff in bags, and change the locks while he's out.
 
Length of stay is one factor. States vary, but in New York (a tenant-friendly state) it can be established without a written lease of any kind in 30 days. With a written lease, that time can go as low as a picosecond.

Other factors include the amount of control and privacy a guest/tenant has. In hotels, maids are always busting in and touching your stuff. The "landlord" is literally in there every single day. In your usual hands-off least, like WeWork provided, the landlord rarely, if ever, even shows up in person, let alone wanders in whenever he wants to. Long-term hotels that offer no cleaning, but are rent-by-the-week affairs, have traditionally had a very hard time staying on one or the other side of that line.

A hotel doesn't "evict" a guest, by the way. Landlords evict tenants. A hotel just throws a guest's stuff onto the street. Incidentally, the hotel cannot touch the person or create a loud scene in the process. That would be assault, battery, and breach of the peace. That's the advice I gave to the one hotel that called me during my practice -wait for the guy to leave, put all his stuff in bags, and change the locks while he's out.

Thanks. I guess I don't know all that much about what distinguishes WeWork's business model from the kind of renting out of space that has been going on for millenia. Landlords and inns are an ancient idea. I'm sure it goes back to feudal times and antiquity at least.

Maybe something like a gym is an analogy? Becoming a member of a gym allows you to use their facilities during business hours, but I suppose they could revoke your membership at any time, if you break their rules, couldn't they? Yeah, as you say, they can't physically manhandle a person to force them to leave, but they could in theory call the cops and have the person arrested for trespassing, disorderly conduct and such if they refuse to leave.
 
Thanks. I guess I don't know all that much about what distinguishes WeWork's business model from the kind of renting out of space that has been going on for millenia. Landlords and inns are an ancient idea. I'm sure it goes back to feudal times and antiquity at least.


As far as I can tell, their profits were supposed to come from two places:

1) taking long-term leases at a discount, because landlords will accept less for not having to keep finding tenants; and

2) automating the leasing experience to save manpower.

The first one is dodgy because property/library taxes might increase as may utility or water prices.

The second one is even worse because: a) you still need a human on site to their diligence in making sure their tenant is a company that's solvent or that one or more individuals personally guarantee the lease and b) that you have somebody onsite to check that the property is being used appropriately and that you, as landlord, are doing whatever you need to in order to maintain the property so the leasee doesn't destroy it.

In reality, the company was raising millions from investors, lying about its market cap, and funnelling wildly irresponsible amounts to its CEO/chief shareholder.

Their closest competitor has a market cap of 1/10th of what WeWork claimed to have, which gives you an idea of how irresponsible their claims to investors were. It's Theranos 2.0, just caught a little quicker. Nobody really looked into their books until they started talking about an IPO. Now, nobody can figure out how they're margins could possibly be as high as they're claiming because they have no new ideas or processes, really.
 
Does he talk in an unnaturally deep voice?

Seriously, how many times do dumb rich people need to be fleeced by Steve Jobs clones before they wise up?

WeWork discovered subletting and doesn't turn a profit. What the hell is so disruptive or revolutionary about this?

Sounds like the CEO is doing a fine job of extracting cash from this project before it goes tits up. Good for him, I guess. Hope he enjoys it before he is sued/incarcerated.
 
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I don't think anybody can deliver that. Thanks to tenants' rights laws nationwide, evicting a tenant can be a months-long procedure with little or no way to recoup losses. And leases generally aren't allowed to circumvent that process. Any landlord-type organization is going to need hefty lines in its budget for legal fees and written-off lease charges (and debt service charges for those who they do pay a debt collector to go after).

Commercial leases generally aren't so heavily regulated. So long as WeWork isn't taking on residential properties, they can probably avoid a lot of these problems. Locking someone out of their rented office isn't going to land you in housing court the way an self-help apartment eviction would.
 
Yes, hype, cult-like atmosphere, booze and soft drinks. Plus incompetence.
They were betting on WeWork labs finding them a few gold-egg laying geese, but they're as useless as the rest of the company.

Good t-shirts though.
 
Here's some humor, WeWork literally cribbing strategy from the onion:

https://twitter.com/tomgara/status/1174382034195832837

Clickhole parody headline, Jan 2019:
"Coolest Job Ever: This Awesome Digital Media Company Hired Post Malone To Entertain Laid-Off Employees With Amazing Music While They Cleaned Out Their Desks! "


WeWork reality, Sept 2019
"After firing hundreds of staff, the WeWork CEO held a somber all-hands meeting explaining why it was a necessary move, but then trays of tequila were handed out and DMC from Run-DMC burst into the room and performed "It's Tricky""
 
I don't think anybody can deliver that. Thanks to tenants' rights laws nationwide, evicting a tenant can be a months-long procedure with little or no way to recoup losses. And leases generally aren't allowed to circumvent that process. Any landlord-type organization is going to need hefty lines in its budget for legal fees and written-off lease charges (and debt service charges for those who they do pay a debt collector to go after).

What exactly is the "that" which you don't think anybody can deliver?

Month-to-month office space rentals seem to be a well-established and reasonably successful business model. And I've generally had no trouble getting month-to-month rental agreements from various landlords for my living quarters over the years. In fact, one place I lived for a while, month to month was offered as an option up front by the landlord.

Whatever risk of eviction liability you envision, the property rental industry seems to be taking it in stride.
 
Maybe something like a gym is an analogy? Becoming a member of a gym allows you to use their facilities during business hours, but I suppose they could revoke your membership at any time, if you break their rules, couldn't they? Yeah, as you say, they can't physically manhandle a person to force them to leave, but they could in theory call the cops and have the person arrested for trespassing, disorderly conduct and such if they refuse to leave.

Well, gyms actually profit from members who don't use their services. That and retail sales of protein powder to the gullible. I don't the We Work works like that. If you aren't using the service there is no membership fee.

I caught a brief snippit the other day that could be summed up by saying "if you ignore our expenses, we are profitable"
 
The only reason I give a crap is that they own Meetup.com, which was instrumental in getting my local skeptics group organized, and remains a hub for our coordination.
 
They were advertising on the NFL this weekend, so that could be part of their burn rate. It sounds like they're offering little more than executive office suites. Hard to see how that equates to a multi-billion dollar company. They aren't anything new; I rented an office in one back in the 1980s.

But they have an APP
 
It's Theranos 2.0, just caught a little quicker. Nobody really looked into their books until they started talking about an IPO. Now, nobody can figure out how they're margins could possibly be as high as they're claiming because they have no new ideas or processes, really.

Yeah, Theranos comes to mind. Elizabeth Holmes had like this Steve Jobs cargo cult thing going on. Jobs wore black turtlenecks and jeans, so Holmes also wore black turtlenecks and jeans. She surrounded herself with the superficial trappings of Steve Jobsness.
 
Yeah, Theranos comes to mind. Elizabeth Holmes had like this Steve Jobs cargo cult thing going on. Jobs wore black turtlenecks and jeans, so Holmes also wore black turtlenecks and jeans. She surrounded herself with the superficial trappings of Steve Jobsness.

And Uber.

Uber is a cab company that's figured out how to pay drivers less. Not an exciting technology breakthrough, just 19th century wage cheapness.

AND THEY STILL CAN'T TURN A PROFIT
 
And Uber.

Uber is a cab company that's figured out how to pay drivers less. Not an exciting technology breakthrough, just 19th century wage cheapness.

AND THEY STILL CAN'T TURN A PROFIT
I think Uber is substantially *not* a cab company. (If they were a cab company, their app would suck. Ass.)
 
Sounds like the CEO is doing a fine job of extracting cash from this project before it goes tits up. Good for him, I guess. Hope he enjoys it before he is sued/incarcerated.


He's already voluntarily paid the company back millions. Of course, his motivation is to increase solvency and investor confidence enough to get that sweet, sweet IPO money.


Commercial leases generally aren't so heavily regulated. So long as WeWork isn't taking on residential properties, they can probably avoid a lot of these problems. Locking someone out of their rented office isn't going to land you in housing court the way an self-help apartment eviction would.


Generally, I agree. I still think being in the landlord business is much more difficult than it initially seems.


What exactly is the "that" which you don't think anybody can deliver?


They cannot deliver the services they promise at the profit margin they claim. The next largest company doing the same thing lives on a tenth the profits that WeWork claims it will make. They have no new tech, patent, or idea that isn't already established.

But they do have an app, so that's something. I mean, it isn't anything, but it's available for download.
 
A couple more stories here:

https://slate.com/business/2019/09/wework-adam-neumann-blew-it.html

Still, the money kept pouring in: $700 million in bond sales last year and $2 billion earlier this year from the Japanese telecom Softbank, which raised $100 billion for tech investments from sources like Saudi Arabia’s sovereign wealth fund.

The Saudi sovereign wealth fund is one clue. It reminds me of something I heard about recently on the Planet Money podcast, about negative interest rates:

https://www.npr.org/2019/09/20/762748958/episode-940-interest-rates-why-so-negative

You might wonder why on earth anyone would invest in something that is guaranteed to lose money. Because that's what negative interest rates mean. You'll get less money back than you invested, guaranteed. It has to do with things like the Saudi sovereign wealth fund, as well as other large investors all over the world who are desperate to invest money. Saudi Arabia wants to diversify its economy so that all of its eggs aren't in one basket. And so SoftBank was happy to take the Saudi money and invest it in "tech startups" like WeWork.
 
He's already voluntarily paid the company back millions. Of course, his motivation is to increase solvency and investor confidence enough to get that sweet, sweet IPO money.





Generally, I agree. I still think being in the landlord business is much more difficult than it initially seems.





They cannot deliver the services they promise at the profit margin they claim. The next largest company doing the same thing lives on a tenth the profits that WeWork claims it will make. They have no new tech, patent, or idea that isn't already established.

But they do have an app, so that's something. I mean, it isn't anything, but it's available for download.

I would say the app is new tech, for a number of related reasons I won't get into here. But apparently not revolutionary enough to produce the expected revenues.
 
Another High tech start up that overpromises and underdelivers. Like that has never happened before.
Recently, Elizabeth Holmes comes to mind.
 
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And Uber.

Uber is a cab company that's figured out how to pay drivers less. Not an exciting technology breakthrough, just 19th century wage cheapness.

AND THEY STILL CAN'T TURN A PROFIT

The knock on Amazon in the early years was that it was not profitable and this persisted for many years. I think the company was founded in 1994 and only turned profitable a couple years ago (a very brief search didn't reveal the exact year to me, but I believe that it was over 20 years after the founding that they finally turned into the black). Now their profits are in the over $10 billion range annually. This has also led to the situation where they aren't paying taxes on those profits, because they can still claim losses from earlier years to offset those tax liabilities. (Amazon Will Pay a Whopping $0 in Federal Taxes on $11.2 Billion Profits)

But not every tech startup is going to eventually become another Amazon. Investors may be hoping that Uber will eventually turn profitable like Amazon did, but it's a gamble.
 
But not every tech startup is going to eventually become another Amazon. Investors may be hoping that Uber will eventually turn profitable like Amazon did, but it's a gamble.


I read a confusing financial article that said that the Saudi's, who invested heavily in WeWork, need losses to offset their gains. They're willing to diversify knowing that it will be, in some cases, wildly unsuccessful.

I didn't understand all the negative interest rate nonsense, but I don't understand nearly enough about financial markets in general to form an opinion.


ETA: Article linked by Puppycow in post 27.
 
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Coworking is a thing already. I have a buddy that owns two spaces that he has turned into small offices and open desk areas that people pay a membership fee and can use the space they pay for. Something like that on a larger scale is what I’m envisioning that my wife could use. She would bring her own equipment and supplies and use it for the couple three days she is in town. Coupled with an app she could log into and see what’s currently available. She pays a fee; they provide her with space. I don’t see how that would run afoul of landlord/tenant laws. She wouldn’t be a tenant; just renting office space hotel-like.

In fact, our current idea is to simply check into a hotel and rent a conference room or something. That’s what I think would be cool - a hotel conference room arrangement but without the hotel and on an demand basis.

It sounds to me like this is what WeWork is trying to do and it’s a sound idea. It’s just run by idiots.
 
I read a confusing financial article that said that the Saudi's, who invested heavily in WeWork, need losses to offset their gains. They're willing to diversify knowing that it will be, in some cases, wildly unsuccessful.

I didn't understand all the negative interest rate nonsense, but I don't understand nearly enough about financial markets in general to form an opinion.


ETA: Article linked by Puppycow in post 27.

It's an NPR podcast which I listen to on my commute, but I realize that not everyone necessarily has headphones or the time to listen to it, so I'll try to summarize the gist of it to the best of my recollection.

There's a "global savings glut" that is arising in developed economies due to aging demographics (older people tend to save and invest more than younger people. This situation is viewed as being likely to continue for the foreseeable future because the demographics aren't going to change overnight. In fact the aging trend is projected to continue in the coming decades, and there's little reason to believe that birth rates will increase significantly in the advanced economies. This leads to a macroeconomic situation where consumer demand is soft and a lot of people are saving money that they want to invest. The more demand there is for things like savings bonds, the higher the price, and the lower the interest rate becomes. It can even become slightly negative because the alternative of hoarding cash also has costs. (Are you going to put it in your mattress? No, you need a bank vault and armed guards and security systems to protect a Scrooge McDuck-style giant pile of money. It costs money to hoard cash.) So interest rates can even become a bit negative, but not too much.

But that's just bonds. Basically there's not much money to be made by investing in bonds these days because the price of them (the safer ones anyway) has already been bid up to about as high as it can theoretically be. But of course there are other possible investments: companies, real estate, etc. The global savings glut would affect these things too. It's likely what led to the last financial crisis, caused by real estate prices being bid up too high and then crashing (among other things).

In other words: too many investment dollars chasing too few genuinely good investment opportunities. Inevitably some of those dollars will go into bad, overhyped investment schemes like this one.
 
Well, everyone will be relieved to know that things worked out very nicely for Adam Neumann. Other employees, not so much:

Here’s what WeWork is giving laid-off employees who aren’t named Adam Neumann
WeWork’s CEO walked away with $1.7 billion and left the company in shambles. His former employees say they are getting shafted.
WeWork recently laid off its first round of employees after the coworking company’s recent implosion — and some former staffers are unhappy with the severance packages they’re being offered.

Recode obtained a severance package that was extended to a recently laid-off employee of Meetup, an app for in-person social events that WeWork acquired. On Monday, Meetup laid off 25 percent of its workforce, or about 50 employees, according to a source. Today, another WeWork-owned company, the coding bootcamp Flatiron School, also laid off dozens of employees.

Meetup is one of several companies WeWork acquired in the past few years that is reportedly up for sale.

The severance offer Recode reviewed (which may not apply to all terminated employees) provides three months of “garden leave” — in which an employee remains on the payroll with benefits but stops working — as well as one month of severance pay.

While four months of pay might sound pretty generous, it’s in stark contrast to the $1.7 billion golden parachute investors handed to WeWork founder and former CEO Adam Neumann. The contract also asks laid-off workers to sign away their right to sue the company over workplace issues and agree to a non-compete clause. That would mean the employee cannot work for a company that competes with WeWork’s wide array of business lines under a preexisting employment contract that sources say could last for between six and 12 months.

As anxious WeWork employees await larger cuts of up to 4,000 jobs in total, this first round of layoffs is raising questions among an already upset staff about whether WeWork rank and file should be getting a better deal, particularly when Neumann walked away with an unprecedented sum for a CEO who brought his company from record heights to near financial ruin.

(I like the photo of Neumann they ran with the story, giving the old victory sign. I would have embedded it, but I'm not sure if that's allowed, so you'll just have to click the link to see the photo.)

With Neumann gone can SoftBank turn around the company to the point where they can justify their total investment, including what they had to pay Neumann to make him go away? I'm still skeptical.
 
With Neumann gone can SoftBank turn around the company to the point where they can justify their total investment, including what they had to pay Neumann to make him go away? I'm still skeptical.

I'm not sure either. Neumann pilfering as much wealth as he can from the company was only one issue. WeWork seemed to be running on the "tech startup" model where the business loses money while trying to become ubiquitous. It's hard to say if the business itself is viable.

I've never really been clear why short-term business sub-leasing is a viable avenue for silicon valley disruption type business.

What has WeWork really done? They advertise heavily and raised a lot of money to buy or lease a lot of office buildings, then turn around and rent them out. That's just called real estate, there's nothing revolutionary here.
 
What has WeWork really done? They advertise heavily and raised a lot of money to buy or lease a lot of office buildings, then turn around and rent them out. That's just called real estate, there's nothing revolutionary here.

Darat had it nailed. They had an App. An App.
 
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