Business

WeWork belly up- SoftBank to Bail Out and take control

WeWork

SoftBank ⁠is planning a financing package that would allow it to take control of WeWork

The WeWork ship is sinking, fast. SoftBank’s bailout could value WeWork below $10 billion — and SoftBank cash could also be used to help CEO Neumann repay his hundreds of millions in personal loans.

The problem with WeWork was that people assumed it was like Uber or AirBnB, that is a tech middleman without any stake in the game. If they’d simply been a link between landlords and renters who made things easier, they’d be able to squeeze both sides to make their income.

Some larger discussions to be had in the event that WeWork goes belly up:

1.) Why was Goldman and JP ready to slang this heaping pile of trash at $47B? Both companies are plenty smart to know better.

2.). Recessions generally have a catalyst, could the WeWork failure just be the beginning? Lights turned on in the massive commercial RE industry that has some shaky underlying fundamentals?

3.) Speaking of shaky fundamentals, how will this affect valuations, and at the very least sentiment on “faux tech companies”… the ones with juicy multiples because they have or are an app, but the core business is one that possesses a very different cost structure compared to a SaaS company.

4.) What does the future look like for those already at the party, sitting there overvalued, claiming 1/4 of the World’s economy is their Total Addressable Market? How much cash will continue to burn before investors demand profitability?

Of course it was a bubble “none of the companies made any money” the talking heads will all opine. Just a little too late, as always.

 

WeWork

I’ve gone mostly quiet on WeWork, as my fascination has devolved into disappointment. In their now ousted founder/CEO and, more importantly, in the unguarded ecosystem that enabled and encouraged him. Thankfully, the market got wise just in time (though he still personally managed to squeeze out $700M in the months before the cards fell). People will be hurt by this, however.

As the We ship started to take on serious water not that long ago, I became concerned that if they sink, so might the Workplace as a Service (WaaS) industry they helped to encourage. I remain mostly bullish on WaaS as of now but many in the business media. And elsewhere are writing down or off the viability of the WaaS model and its fledgling industry. And, for whatever reason, WaaS believers and practitioners continue to sit quietly on the sidelines.

SOFTBANK’s commitment to turning around their WeWork investment is impressive. The real question is how close that turnaround can get to the $48B valuation that was the last round. What do you think?

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