WeWork: profile of a company in crisis | FT

WeWork: profile of a company in crisis | FT


It was supposed to be one of
the largest IPOs of the year. But the shared
office group WeWork was instead plunged into
crisis after investors failed to buy into
its valuation of $47bn or its promises of elevating
the world’s consciousness. The IPO was called off, and
the chief executive resigned. But what exactly is WeWork? Put simply, it rents
out office space, decorates it in a
distinctive style, and rents it out on
all-inclusive deals to businesses ranging from
start-ups to Facebook and HSBC. It’s grown at a breakneck pace. In recent years, it’s become
the largest private tenant in Manhattan and central London. The former chief
executive, Adam Neumann, previously told the
FT it was about much more than office space. A lot of times,
people ask me if we compete against co-working
spaces or against Regus and the answer is no. We’re competing against office. We’re changing the
way people work. One of the ways that really
differentiates us is community. But WeWork’s quick
expansion came at a price. As the company grew,
bankrolled by its biggest investor, SoftBank, its
losses have ballooned. Last year it reported a loss
of $1.6bn on sales of $1.8bn. They combined three things that
when put together are very, very dangerous or difficult.
When you have losses… like, very big losses… when you have opacity…
like, you’re very, very difficult to analyse,
because you haven’t provided details… and arrogance. So when companies are
difficult to analyse, then the trust of the management
team becomes more important. And when investors, you know,
looked hard at this team to see if there was a team
here that they could trust, I think that’s
when things started to unravel for this process. Another problem for investors
was the way WeWork is run. This is the business
structure they submitted when they were hoping to list. It’s a structure known as
a UPC, which offers tax benefits to early investors. It also creates
different share classes. The former chief
executive, Neumann, would have had 20 times
as many votes per share as ordinary shareholders. Investors were worried about
his levels of control and other deals, like his decision to
charge the company almost $6m to use the word “we.” After an outcry, that
decision was reversed. Now Mr Neumann is out. The new co-chief executives
have signalled a slimming down of the company, and they are
selling off its private jet, which Neumann used
to travel the globe and which the company bought
just last year for $60m. But some landlords still think
WeWork has huge potential. Mike Hussey of
London-based Almacantar owns one of WeWork’s
largest sites. He says businesses are
flocking to WeWork spaces. What WeWork have
done is said: “We think modern companies want
something completely different. They want a fully serviced
operation, the ability to locate alongside
like-minded people. And we are prepared to wrap the
whole thing together, provide you with space that really
works for your staff, provide you with the
flexibility to do what you want to do in your space, and
provide you with all the support mechanisms that you need in
order to occupy that space.” And that is where the
market – and they’ve stolen the march on
the market – that is where the market
has really changed. The new co-chief
executives will now have to make that
case to investors and WeWork’s worried staff. The company plans to
drastically slow its expansion to avoid running out of cash. But it faces an uphill battle
to show that WeWork really is at the vanguard of a real
estate revolution and not just another
bloated unicorn that couldn’t stand up to scrutiny.

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About the Author: Oren Garnes

100 Comments

  1. So basically it is nothing more than a glorified 'and overpriced Landlord'?
    Change the name from 'WeWork' to 'WeRENT', and that would reflect what they do.

  2. I'm gonna be honest I thought this was a parody video from the thumbnail, title and company name for every generic company that is in a crisis… but I guess this was pretty informative.

  3. Even a newborn 👶 could see this would have been a stupid stupid investment. Sure ill invest in a company with billions in debt and doesn't turn a profit 🤣🤣🤣 No thanks, ill stick to 80-100+ year old companies that actually make money.

  4. Jesus, FT! Hire a colorist or at least someone who understands correct lighting. The poor woman looks like a stage 8 cancer patient.

  5. Finally some conciousness out of these empty promises investment trends.
    U cant hack growth that fast without any public investing/trusting into it, how many lives changed by wework compare to uber or facebook?

  6. I might not have enough info about a company but I can say what I have experienced by working there. The company where I work has an office inside one of their buildings. The buildings are amazing as well as the benefits that people who are there have. There is a big common area, we can drink as much coffee, beer and tea as we want. You feel like you are working in a very care free environment. People are happy, their employees look happy and everybody is very positive. There are also other stuff, free breakfast on Mondays, free candy in a loby etc. The model might be a scam, my bosses might pay high rent but I know that I feel less stressed because I work there. Also when I speak with people who work in other companies and don't have the same benefits I feel more special. You can judge me on what I said, but that doesn't make it less true.

  7. Well Wework will have more offices to choose from if Brexit happens.
    Say goodbye to that "G5…..And lottttttttts of MMMoney!"

  8. Lot vat cost price jump over done saving move out let pet in different cost monetary in appect expensive out does point over inventory negative supply none zero point why just chart use finance shere price?

  9. We work is wack. All style and no substance,

    I went I’m into wework in Seoul and it was $350/month to sit in a glorified coffee shop and $600/month just to sit at a desk

  10. Invest at your peril. Huge valuation, management taking the Mickey with corporate expenses. Better off with solar powered torches 👍

  11. Some investors are complete morons. WeWork has said plenty of times what they do. It's in the name. Buzz off if you're too scared to invest in a company.

  12. 0:40 "largest private tenant"? Does she mean landlord? They rent space out, they aren't the tenants – are they? Or do they rent space to re-rent it? Sounds more like a con than a business to me.

  13. I’m sorry. But does this woman look like they exhumed her body to film this video? Jesus Christ a little blush on her cheeks please

  14. I worked for one day in a WeWork office. They cut on everything. They expected 2 people to do 5 people’s job with these “super high standards”. Noped the hell out

  15. The concept is priceless indeed, but there are competitors w better work spaces and lower monthly memberships (like where my shared creative work space is at in Pasadena! And across from a wework)

  16. 0:51 im pretty sure that one of the reasons that ipo fell off… wework and regus are the same indrustry regus just spends less on decoration and extras..wework is more likely gonna fail if they dont figure out the industry and competition…..

    No research before trying to expand…wasting money on a private jet(+fule) and barely any transparency….

  17. I don't even know entirely what their model is. That is the problem. They were a real estate company disguised as a tech company. Commercial property for startups would be their niche at least in my eyes or an event type of situation. I don't see or understand the elevate the consciousness BS because that is not concrete nor is it something that solves a problem in real estate. Marketplace is key for any internet company to be a success. They just didn't have anything concrete or there.

    Revolutionizing commercial property would be good. A lot of businesses could be remote and have a day set up to go into the office at We Work. This would be especially true for high priced areas like San Francisco where maybe you want a remote workforce with a 1 day commute so that you can coordinate better. That is the only area where I can see the business really doing great things because now, you have 5-7 businesses that meetup with laptops and setup and meet. Panera Bread though is the shady company hangout. Their competitors also are the hospitality business for events like the shady "MLM" night at the hotel event place. But whatever.

  18. WeWork is the definition of bloated unicorn. They're a delusional real estate company borrowing tech terminology in order to differentiate themselves (see: SasS, but space instead of software). They're all hype and are way too overvalued. And their business has a very serious and obvious risk. Subleases are absolutely vulnerable to recessions, WeWork's entire business is betting that they can recooperate the money spent and make a profit on leases by subleasing. They're a complete waste of time. The only reason anyone is still talking about them is that they're being propped up by Softbank. Softbank is stuck with the sunk cost fallacy, WeWork is a joke.

  19. If u are going to start a company like we work use the investor money to buy property and renovate it then after you don’t have to worry about paying rent to someone else while you look for companies to rent out co-working spaces in your company owned buildings.

  20. Let me guess the company is basically overprice and the reason the company is overbloated is because an investor is over value it when he invest on it

  21. Using stock-buyer's money to survive deep losses while you drive other companies out of business and killing jobs, like Uber/Lyft are doing to taxi companies… This is not true capitalism. These companies should be taxed to high-hell on GROSS revenues if we're going to talk about a "Guaranteed Living Wage" as a way to mitigate the damage they're doing to society.

  22. Subletting real estate with furniture qualifies as a tech IPO nowadays? Lol, a gardener or drywaller carries more tech in their truck than that

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