WeWork Parent Weighs Slashing Its Valuation in Half

Re:WeWork Parent Weighs Slashing Its Valuation in Half by aresant on Thursday September 05, 2019 @10:43AM (#20887156)

Softbank has $12b+ up so far into WeWork. (a)

So are they better off supporting the IPO price by exposing themselves another $3b (20%), writing down the IPO by 50% which likely is at least $3b in losses, or delay?

And muddying their view, as I commented yesterday, is the fact that there is a huge debt contingency surrounding this IPO.

EG if WeWork does NOT raise at least $3billion in this IPO they will be in default of a contingency with lenders that will WITHHOLD a committed $6billion credit line. This huge credit facility is their growth engine forward (b).

(a) https://www.reuters.com/article/us-wework-m-a-softbank/wewor....

(b) https://www.bloomberg.com/news/articles/2019-08-01/wework-se....

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by frakkingcylons on Thursday September 05, 2019 @02:36PM (#20889542)

Both of your links are broken.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by bertil on Thursday September 05, 2019 @10:46AM (#20887197)

In case of a default, what would happen to all the companies who could on WeWork operating for their office to remain functional?

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by goatinaboat on Thursday September 05, 2019 @10:53AM (#20887285)

They will be in Regus/IWG the next week, and a week after that will have forgotten that WeWork ever existed.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by joncrane on Thursday September 05, 2019 @12:13PM (#20888135)

Does Regus/IWG have the capacity to absorb the demand?

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by runako on Thursday September 05, 2019 @12:27PM (#20888278)

Apparently the two companies are roughly the same size in terms of square footage under management. (IIRC IWG is a little bigger.)

So not likely IWG could absorb significant percentages of WeWork customers on short notice.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by YawningAngel on Thursday September 05, 2019 @03:09PM (#20889820)

If WeWork goes under there are going to be large amounts of co-working space going cheap.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by hdpq on Thursday September 05, 2019 @05:33PM (#20890819)

...so short CRE REITs, am i right?

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by YawningAngel on Thursday September 05, 2019 @06:01PM (#20891039)

I don't advocate active trading unless you have substantial non public information, and I don't think this meets my non-public criterion

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by jessaustin on Friday September 06, 2019 @06:20AM (#20894430)

Stay out of REITs anyway; once they have your money they essentially never have to give it back. I can't imagine how something so illiquid could be shorted in the first place.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by joncrane on Friday September 06, 2019 @10:10PM (#20901356)

Aren't REIT mutual funds the most likely vehicle for a retail investor to invest in REITs?

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by hiccuphippo on Thursday September 05, 2019 @04:05PM (#20890222)

That's a good problem to face.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by adventured on Thursday September 05, 2019 @12:06PM (#20888061)

IWG is tiny (a mere $3b in revenue; $4b-$5b market cap), they'd never land all of WeWork's customer base or WeWork itself. They'd trivially be outbid. SoftBank would acquire WeWork and continue operations before they'd let the business go to a small company like IWG or watch WeWork get acquired for ~$500m-$1b (which is all someone like IWG could afford).

Far larger players like SoftBank, Blackstone or KKR would be all over scooping up the bones of WeWork. There's certainly no scenario where WeWork doesn't end up in the belly of a private equity company, or a large real-estate holding company. The next recession will destroy them. They'll be lucky if they survive even outside of a recessionary environment.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by goatinaboat on Thursday September 05, 2019 @01:54PM (#20889192)

IWG is tiny

This analysis looks very different if you do it not in dollars but in sq ft, or in desks. IWG is much bigger than WeWork, but realistically valued.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by empath75 on Thursday September 05, 2019 @01:55PM (#20889200)

IWG has 10x the total square feet to rent that We Work has.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by d883kd8 on Thursday September 05, 2019 @03:07PM (#20889803)

WeWork is on pace to hit ~3-4b revenue this year

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by polygotdomain on Thursday September 05, 2019 @01:59PM (#20889242)

If WeWork shuts down or defaults, smart landlords/property managers will take over operations. They're stuck with the space, and WeWork has already done the hard work of getting the short term tenants. Transition the tenants to "leases" directly with the landlord, keep the wifi on, the coffee brewing, and the place clean. In the near term does the tenant care if WeWork is running the place?

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by rtkwe on Thursday September 05, 2019 @11:00AM (#20887374)

Depends on just how bad the default is but they'd likely go into some kind of managed bankruptcy. Since WeWork doesn't actually own the buildings companies could wind up making deals more directly with the CEO who does own the buildings to at least maintain the space so they'd just lose the other services provided by WeWork and wind up in a more normal relationship with the building owner. Hard to know without it happening because it depends so much on the details of how it happens and the reaction of so many parties.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by whatok on Thursday September 05, 2019 @11:09AM (#20887486)

I wouldn't even worry about having a place to work out of. VC funding has been drying up and a massive down round or a default is going to close that right up.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by amerine on Thursday September 05, 2019 @10:54AM (#20887303)

Since they don’t own any buildings I bet we see the WeWork ceo sell the buildings and or move to establish small clones of WeWork with local contracts.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by baybal2 on Thursday September 05, 2019 @11:58AM (#20887988)

> In case of a default, what would happen to all the companies who could on WeWork operating for their office to remain functional?

Giant rate hike.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by atm0sphere on Thursday September 05, 2019 @10:48AM (#20887225)

tbtf. fed will step in

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by jonwachob91 on Thursday September 05, 2019 @12:58PM (#20888606)

The Federal Reserve only steps in when there is 1) system wide risk, and 2) when the company they are interfering with owns enough assets to guarantee the fed loans.

* Bear Sterns had healthy assets, Lehman Brothers did not. AIG had enough healthy insurance premiums to guarantee the loan to fix the unhealthy insurance products. Fannie Mae and Freddie Mac owned the home mortgages assets.

---

1) WeWork doesn't have a substantial enough real estate position to bring down the entire real estate system.

2) WeWork doesn't have any assets to guarantee a fed loan.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by atm0sphere on Thursday September 05, 2019 @01:06PM (#20888709)

should have put an /s

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by psv1 on Thursday September 05, 2019 @10:51AM (#20887261)

No chance this will happen.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by CountSessine on Thursday September 05, 2019 @10:52AM (#20887282)

Unlikely.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by Twirrim on Thursday September 05, 2019 @11:32AM (#20887725)

Why?

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by totalZero on Thursday September 05, 2019 @11:33AM (#20887737)

That $3b in "losses" would be paper losses, but would also improve any ratios that are based on the total value of the company. In doing so, it would reduce some of the pressure on WeWork to produce higher revenues.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by whatok on Thursday September 05, 2019 @01:35PM (#20889019)

Paper losses that trickle up to parent SOFTBK stock which has been pledged as collateral for loans.

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Re:WeWork Parent Weighs Slashing Its Valuation in Half by kjs3 on Thursday September 05, 2019 @12:57PM (#20888590)

Unless there are expected revenue targets that aren't ratios.

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