I read analysed all ~180 pages of the WeWork SEC filing (S-1 and Balance Sheet): It’s even worse than you think.

by talesofstocks

 

tl;drIN MY OPINION WeWork is at best an incredibly tenuous business idea that operates on the idea that their growth, building construction, and the economy as a whole won’t slow down in the next 2 years and at worst is structured like a Ponzi scheme that only works if it is able to infinitely increase the number of tenants and buildings if it can’t break even. Their financials look worse and worse and are predicated on multiple bad ideas, mainly deferred rent and their growth model. Please don’t sue me.

This all comes from their SEC S-1 filing:

www.sec.gov/Archives/edgar/data/1533523/000119312519220499/d781982ds1.htm#fin781982_2

HELLO to all the autists, trolls, suckers, Young Billionaires, bagholders… and yes, even the hater’s. I’m Tales of Stock’s, your new god and the man who will singlehandedly bring down Citron Research as the #2-ranked Lemon Party on the internet. Let me break it down right quick why WeWork is a complete shitshow. You ready? I’m ready like Tevin Campbell. Okay let’s get serious, the joke’s stop here |.

What is WeWork: WeWork rents buildings from landlords and designs trendy, rentable small workspaces for gig workers and small business. WeWork promises landlords it will fill their building consistently in exchange for a lower overall rent in total. It attracts customers through lower rents in shared spaces compared to finding their own offices, and the trendy idea that it’s fun to work in a glass room with 500 people eating instant udon outside your office, and, if you’re a woman, occasionally looking at your body for a few milliseconds and wondering if you’ve watched Stranger Things season 3 too, nah you probably haven’t I should just get back to my work.

Alright, this is the cruncher: WeWork charges too low of rent, and so it loses money, but if it charges higher rent it will lose occupancy and will, again, lose money. This is a no-win company and the growth it would need to prevent several more years of increasing losses is unrealistic. This follows the same “subsidize to grow” growth model that Uber also takes. They are betting they can pay their deferred rents by forcibly growing out of their existing, ever-increasing debt. However, WeWork’s situation is far more precarious – Uber drivers wouldn’t be able to taxi fares around if Uber were to go bankrupt, and largely don’t need Uber to survive. However, landlords that own their buildings can still rent their buildings to businesses with or without WeWork, albeit possibly not as easily or stylishly (depending on your opinion of darkly dyed woodgrain benches and white sofas).

WeWork’s current business model involves them successfully finding, signing and building 1,250,000 more workspaces in the next 18 months. To put that into perspective, at an extremely generous 1000 spaces per building, that’s over 1200 new buildings found, signed, designed, leased and filled in 2 fuckin’ years, that’s 2 damn buildings a damn day. Check this: A massive portion of WeWork’s financials counts the design and interiors of the spaces they lease as assets in their valuation, which is incredibly hard to valuate and shaky accounting at best and possibly fraud at worst (again please no libel suit, thanks Neumann). We should note that even with all 1.9 million workspaces active, they won’t be profitable.

Their business plan can be simply shown in the following laughable infographic of a child’s see-saw:

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edit: LOL I JUST REALIZED OVER HALF OF THEIR OFFICES MIGHT NOT EVEN EVER EXIST, SERIOUSLY LOOK AT THIS <—–

They acknowledge the economics of their situation are precarious themselves in their risks and challenges sections:

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Also funny: All of its JV and VIE are losing money in China, Japan and India and are much more likely to withdraw than US-owned landlords, because we all know how fickle Asians are.

WeWork believes that it can have its leased offices profitable in 6 months but there’s no evidence that any of their leased spaces have ever actually turned any profit (Key point: notice how much it looks like an erect dong and balls). (5):

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What now follows is an examination of their financials in the S-1, feel free to let your eyes glaze over and the protons hit your retinas as you pretend to understand what you’re seeing.

Deferred rent is possibly the most massive problem that will come to fruition for this company. WeWork had almost $3 billion in unpaid deferred rent to its landlords that at some point will have to be paid. (F-35):

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Unclear repayment:

WeWork’s senior notes repayment of its loans looks a wee tiny bit sketchy after 2024. (F-36):

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In 2020 alone they will have a nearly 50% jump in their future rental minimum payments and for some reason expect a plateau followed by a massive jump after 2024 which isn’t properly explained other than “The future, lol!!!!”, that’s a big yikers. (F-59):

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WeWork is not paying off debt despite cash injections from investors like SoftBank. You’d probably do well to just do the opposite of whatever they invest in because SoftBank Group’s execs are completely clueless when it comes to foreign investment. (F84):

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Shareholders are currently bagholding $2.3 billion, lol. (F-70):

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Absolutely disgusting net losses per share. And this is BEFORE the IPO. (F-126):

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Neumann’s compensation itself is a complete mess. (Please don’t sue me) (186):

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Nuclear-Hot Takeaways From Quizno’s:

  • WeWork has never made any money and already owes an insane amount of money and will likely only owe even more money in the future relative to their size.
  • A piping-hot economy is boosting gig work and increasing the pool of gig workers as viable tenants, however (see next point!!!)
  • Gig work and small gig work companies is the main business funding shared space and is extremely susceptible to economic downswings.
  • Shared space is likely a trend, not a new norm, once people get sick of pretending to be Japanese or the economy drops and people realize you don’t need an $800 a month office for your DeviantArt page.
  • Even if WeWork had 100% capacity filled it still wouldn’t be profitable with how they structure their business.
  • If at any time they lowered rents on their tenants, it would bankrupt them. Raising rents to pay their currently deferred rent would lower occupancy and would bankrupt them.
  • In the next 18 months expect an insane amount of landlord litigation for unpaid rent.
  • (Extremely Borat voice): WeWork, wah wah wee wah!

-Prediction Dereliciton Zone-: This company’s stock will be worth $3.50 by this time 2024.

Everything I have typed here in my opinion and don’t trade based on people’s opinions and I take no responsibility for anything, I mean in general in my life like my nonexistent kids or my job, but especially with regards to your trading, so don’t do anything I say you should do (but you know you will, you complete monkey).

Thank you for attending my full-front nudity TED talk and may G*d Bless Your Mess.

RemindMe! 5 years.

 

 

Disclaimer: Consult your financial professional before making any investment decision.

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