WeWork IPO Reveals It Lost $1.9 Billion Last Year, and Is Losing About $5,200 Per Customer (cbsnews.com) 59
WeWork, the office-sharing, kegger-hosting phenomenon that has redefined the modern workspace, is also raising the bar for how much money a startup can lose and still be considered a buzzy investment. From a report: WeWork's corporate parent, the We Company, which released its IPO documents on Wednesday, loses roughly $5,197 per customer who inhabits its office space per year. That's considerably more than newly public companies like Uber or Beyond Meat are losing on their growing customer bases. WeWork, which says in the offering document that its corporate mission is no less than to "to elevate the world's consciousness," is on track to lose $2.7 billion this year from its operations, up from nearly $1.7 billion last year. The company's revenue in the first six months of the year nearly doubled from last year's first half, to $1.5 billion. The company said its losses rose just 10% from a year ago, but that includes a $470 million non-operating, and likely non-recurring, gain. Exclude that, and losses from the We Company, which says it will trade under the ticker symbol "WE," rose 60%. "If you work at WeWork, drive home with Uber, and then order food by DoorDash, you're engaging with three companies that are projected to lose about $13 billion this year," tweeted Derek Thompson, a staff writer at The Atlantic.
Further reading: WeWork Files For IPO After Losing $1.9 Billion Last Year.
Further reading: WeWork Files For IPO After Losing $1.9 Billion Last Year.
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It used to be reasonable to at least expect some chance of legal profit. Now I just wonder where I can get investors this trusting.
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There's a big difference between startups that lose money because they're investing more in growth than they make in profit, and startups (or companies... Uber and We aren't really startups) that lose money on every sale.
The former just needs to stop growing so fast to be profitable. The latter needs to change its business model to do so.
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Well, crazy as it sounds...somehow for Amazon, it DID....
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> Well, crazy as it sounds...somehow for Amazon, it DID....
Yes, as long as you can lose money long enough to become the 800 pound gorilla in the market area you are aiming for, it will work. Unfortunately I don't think there is an 800 pound gorilla slot to be taken in the "flexible workspace co-office-sharing" sector, so WeWork's path to profit seems very uncertain.
Re:It's a STARTUP... (Score:5, Informative)
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The building owners will, should WeWork fail, still own the buildings. They'll need to find someone else willing to lease them, or sell them, but they retain that substantial valuable fixed asset.
It is 1999 again. (Score:4, Interesting)
Step 1: Collect Underpants.
Step 2:
Step 3: Profit.
Seriously, what else is the 0.1% going to spend its money on?
Re:It is 1999 again. (Score:5, Informative)
Yeah this definitely seems like tech == $$$ hype. WeWork's competitor IWG has 5 times more members, double the revenue, and is profitable, but isn't "tech" enough so is valued at less then tenth of WW.
https://www.vox.com/recode/201... [vox.com]
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That's because they don't have cool staircases: https://www.wework.com/ideas/s... [wework.com]
This came by on Linkedin a while back - I'm amazed that a company spends the time to photograph and then write a post about their bloody staircases. When I think about a shared workspace, I want decent wifi, a comfy chair and desk, some peace and quiet and maybe a kitchen to make a cuppa. At some point I'm also going to want a vaguely hygienic shitter, and somewhere to get some food. But I can't honestly say I've ever worried a
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Step 2a: Ship underpants to Japan
Step 2b: Sell them in vending machine
Critical question: Why? (Score:2)
The real question is why are they losing money on what seems like is simply catering office spaces they rent? Could it be that they are investing in huge chunks of real estate?
Until these basic questions are answered then this should be presumed to be a hit piece because nothing about their business concept seems far-fetched.
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Commercial real estate and fancy decorating are expensive, probably most people looking to co-work aren't willing to pay enough to cover the cost of the space. WeWork is probably following the ol' SNL model of "making it up on volume".
There was also another story here about how WeWork's CEO was buying properties and leasing the space back to the company. Given that conflict of interest one has to wonder whether WeWork is paying more than they have to for space.
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Moe's Tavern. Hey, I'm looking for a Mr Hannigan. First name Sean.
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Re:Critical question: Why? (Score:5, Insightful)
The real question is why are they losing money on what seems like is simply catering office spaces they rent? Could it be that they are investing in huge chunks of real estate?
If, as was mentioned higher up, the company is leasing space from the CEO; and given that at least one of the company's owners is a New York real estate developer - it’s within the realm of possibility that WeWork might exist at least in part to channel money from investors to the owners’ pockets through inflated leasing fees.
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They are wanting to dominate certain markets, so they are leasing up some of the best spaces, well in excess of demand. They are also competing with other co-working companies that are significantly lower cost.
Some landlords have traditionally dedicated parts of their buildings to smaller tenants— less than 3,000SF. They do this to make sure they have flexibility in both the upcycle and downturns. Their lease terms and incentives reflect this.
Once a little recession hits WeWork will really falter.
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Could it be that they are investing in huge chunks of real estate?
That would hurt their cash flow, not cause losses.
You don't 'lose' money by investing it, you turn your liquid cash asset into a less liquid asset (which is a fixed asset, if it's real estate). It's still your asset, so you've lost nothing.
Subsequent years can get more complicated but the losses are coming from elsewhere.
Sure they lose $$$ per customer (Score:4, Funny)
But they are going to make it up in volume!
New business model (Score:2)
I plan to start a company, our business model is that for a small fee we'll stand outside the doorways of places that lose money per customer and prevent them from going in.
For WeWork, I'll charge just $1k per preventative entry. A bargain that should raise the negative earnings substantially!
Ya, but ... (Score:4, Informative)
They now have kombucha and cold brew coffee on tap, instead of beer, in CA so ...
From: https://www.businessinsider.co... [businessinsider.com]
WeWork's Californian tenants were dealt the second blow in months as the co-working space started putting locks on complimentary kombucha and cold brew taps, which keep people from consuming the beverages.
The shackled taps appeared just a few months after WeWork stopped dispensing beer at its California locations in order to comply with state alcohol laws, which the San Francisco Chronicle first reported in mid-February. Instead of beer, WeWork had outfitted its California co-working spaces with kegs of kombucha and cold brew coffee.
Referenced from So How Much Is WeWork Spending on Kombucha Taps as It Hemorrhages Billions? [gizmodo.com]
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cold brew coffee
'scuse me? Why in the world would you keep that in kegs? Cold brew coffee is what you pour into the sink before pouring fresh, hot brew coffee into the cup.
What next - kegs of pee?
Investors see something ordinary people dont? (Score:3)
Maybe the company has a fundamentally sound business model that takes a long time to be profitable (Amazon) and maybe the company is looking further down the road than is traditional for a start up (Uber with self driving/flying vehicles). But I wonder how many companies are kept afloat by inventors not wanting to admit that a company they've pushed are dogs and are doing whatever they can to see some kind of big return down the road?
If anybody knows who these investors are, please send them my way.
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I don't think modern investors care about a company's profitability. They really only care if it has a reasonably good chance of reaching an IPO and selling for more than the total amount the investors put into it.
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A financial columnist pointed out in an article I read recently that the rich have such giant piles of money that they're having trouble finding things to do with it. Interest rates are essentially zero so if you don't want to just lose it to inflation you have to invest it. Throwing money at stupid startups has the advantage that if they bomb the losses are tax deductible, and who knows, one might hit it big.
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Maybe some guillotines would focus the rich's minds on redistribution of their largely unearned wealth.
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I think some of the smarter ones have seen that possibility. Notice the tech billionaires who support universal basic income and increases to minimum wage.
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This is exactly why macro-economists are critical of the long low-interest phase:
It was meant to save the financial system in 2007/8, by "forcing" investments.
After a while, all it does is create bubbles and make people allocate their money sub-optimally, i.e. wasting it on bad investements.
For the economy at large, a mis-allocation is bad and will lead to deeper recessions.
The longer this phase lasts, the worse it will be.
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If we run into a recession in the near future we're screwed. Interest rates didn't ever get raised in the good times that followed 2008, so there's nowhere to lower them to when we hit bad times.
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The business model of choice these days seems to be
1. Line up lots of VC capital.
2. Lose money for years on end to build market share.
3. Inch toward breaking even.
4. IPO billions.
What, if any, of this is illegal? What, if any, should be? Do US antitrust laws need some major overhaul? Elizabeth Warren, do you have a plan for that...?
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> What, if any, of this is illegal? What, if any, should be?
How about:
>3. Inch toward breaking even.
>4. IPO billions.
You can "inch" toward profitability forever and never get there. How about a law that states you can't IPO unless you run a profit for at least 4 consecutive quarters? That would stop a lot of this crap.
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Why? Stupid investors, VC or public, should be more than welcome to throw their piles of cash around. At least it redistributes some of it.
Institutional investors and funds holding money in trust should be prohibited from participating.
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Ummm... because the purpose of antitrust law isn't to protect stupid investors. It's to ensure a healthy, competitive marketplace. There are legal ways to attain a monopoly, and illegal ones. Buying a monopoly by losing money for years while your competition does not have that luxury shouldn't be one of the legal ones.
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Are you sure you replied to the right thread? We're talking about IPOs, not monopolies. Most companies already have anti-monopoly laws and other regulation to manage competition.
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Well, we're talking about IPO's of companies that are valued in the billions based on a business model centered around tech-related hype and VC investors willing to run the business at a loss until it attains monopoly or near-monopoly mindshare prior to an IPO cash out.
So, yes, it's about monopoly and IPOs.
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The business model has some logic— you improve real-estate efficiency by renting what you need when you need it, and not having 20% excess space that may never be used. This is especially endemic with smaller companies that are growing, companies that experience cyclical hiring needs, and companies that may be shifting market focus which could result in laying off or closing offices. “Pay for what you use” sounds good at first.
I looked at WeWork for our office, along with two much smalle
So are Lyft and Uber (Score:2)
Face it, all three will die soon.
(caveat: I successfully made a lot on IPOs in tech, Hong Kong, and China, but I actually would read the prospectus, which is usually very informative, if you're really an investor, and not a speculator)
When the cash is gone, so are they (Score:2)
Second Dotcom Bubble, period. (Score:3)
I will grant that they provide an actual product (hipster preschool-inspired co-working spaces for startups.) It's not like they're not providing a service. But, regardless of financial structures...how can you lose money by re-renting office space for more than you're renting it for?
I do think this company is very susceptible to the Second Dotcom Bubble bursting (if it ever does.) If the market dries up for preschool office spaces, the company isn't left with much other than leases on expensive real estate, and they'll have to rip out all the beer taps and colorful furniture before giving it back to the landlords.
IPOs like this were happening back in 1998/1999...pets.com, valinux.com, theglobe.com... I think the only thing making them seem like good investments are (a) catering to other tech startups, (b) they're re-renting a lot of desirable office space. It is kind of like selling tools to prospectors on their way to the gold fields...if that revenue stream ever dries up, more traditional companies might not move into their spaces.
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Their vacancy rate in the quest to grow is their financial drain. They actually have a fair number of Fortune 500 companies among their tenants. It makes for an easy way to quickly open a new office— 30 days vs 6-9 months. That time matters when you are searching for talent; it is worth paying a premium for it. When you add the flexibility in lease terms it gets even more interesting.
But, I don’t think I would want to be either an investor or tenant when it gets right down to it. Too much ri
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Beer (Score:3)
I admit I'm old. But, what professional workplace provides alcohol to its employees? Even if you had solely a bunch of autistic, socially awkward coders in your company, you still run a huge risk of someone doing something dumb out of the #MeToo realm. Double the probability if sales, marketing, "brand management" or executives are present.
Maybe it's a tech startup thing...since they're basically living there 90+ hours a week, they might as well make it feel like home? I just don't get it...maybe I'm too old to be duped into spending my life at work?
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But, what professional workplace provides alcohol to its employees?
Actually, the company I work for has a "beer fridge" in the office and some people hang out and drink beer after work.
Of course, I work from home, so I rarely get to partake of it. I have to buy my own beer...
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Some people are capable of having a beer and not assaulting a coworker.
I gave a talk at a co-working place once. Before I went up to the podium they handed me a pint. It was an unusual experience, but not an unpleasant one.
Actually, it's not a bad idea. Free beer in the office. If you're not mature enough to handle it, you're fired.
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The sales, marketing, "brand management" and executive parts of a business demand alcohol. It's how they do half their jobs.
I think I just agreed with you. Ban alcohol from the workplace.
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Most companies that I've worked for have done this, for special or even weekly events. At one, an employee tried a backflip into the hot-tub/spa and got hurt.
Companies do this because party girls and brogrammers give loyalty in exchange for substance abuse.
The offices are noisy and made to look "cool" (Score:3)
The offices are noisy and awkwardly designed. The ceiling is unfinished, the walls are glass, and the floor is hardwood. It's deafening sometimes. You have to pay extra for privacy since the walls are glass.
On the bright side, the gigabit internet is solid.
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> It's deafening sometimes. You have to pay extra for privacy since the walls are glass.
That sounds to me like a feature, not a bug from WeWork's perspective. A way to upsell.
Who the fuck is WeWork and why do I care ... (Score:1)
... that yet another business has a shitty business plan?
--
Cutting your dick off doesn't make you female; it makes you a pussy for not respecting the X and Y chromosomes you were given for a reason.
It's a disruptive wannabe-unicorn burn-up (Score:3)
The main goal is burning up as much as investors money as possible in order to do something disruptive and someday capitalize that position with an undisclosed magical business plan. :
They are not focussed on any short term goals as that does not matter for burnups.
They openly admit in their IPO prospectus that they are not sure wether it will work
"Our rapid growth may not be sustainable."
"Our business has grown rapidly, and we may fail to man
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"WeWork is an American company that provides shared workspaces for technology startup subculture communities, and services for entrepreneurs, freelancers, startups, small businesses and large enterprises."
Like server colo, but for people...
Tech (Score:1)
Another company being run by vegan loonies (Score:2)
Perhaps WeWork could break even if only its management didn't spend so much time on pet political projects [cnn.com]