double its 2016 sales. Unfortunately, its losses also doubled to $933 million. WeWork manages to lose $2 for every $1 that comes in the door . It’s like Tesla... but for cubicles. WeWork would argue it was investing for growth. At one point, it predicted December 2018 would be the “turning point” to profitability. Not only did WeWork miss its target...when the books closed on 2018, we learned that WeWork’s losses are growing faster than its revenue . Only the worst businesses manage to lose money at a faster rate as they grow larger. In 2017, Masa invested $4.4 billion of the SoftBank Vision Fund into about 20% of Since its founding, WeWork has lost money at an astounding rate. Even though it has doubled its annual revenue, it manages to outspend its sales year after year. WeWork, boosting the company’s valuation to around $20 billion. Critics noted this is roughly 10 times the valuation of IWG, despite the fact that IWG had more than 2,000 locations and WeWork controlled a couple hundred. To no one’s surprise, few other investors lined up to buy in at Masa’s sky-high valuation. So in June 2018, Masa began backing up the Saudis’ truck yet again – this time offering an incredible $16 billion in cash for 35% of WeWork – giving the company a valuation of around $45 billion.
past two years spending the Saudis’ money as quickly as he possibly can. Putting $100 billion to work isn’t as easy as you would think... But Masa has been dutifully seeking out a portfolio of dumpster fires into which he can heave fistfuls of Saudi money, and he has found one particularly pitiful Tesla-esque dud... It’s WeWork, a company whose business is as simple as it is unoriginal. WeWork enters long-term leases for office space, adds desks and couches, then splits the area into smaller spaces to rent for shorter terms. WeWork profits from the difference between the cheaper long-term lease rates and the more expensive short-term rates. It’s not a new idea. The firm IWG (formerly known as Regus) has been doing this since the 1980s. After emerging from bankruptcy in 2004, IWG now generates positive cash flows and sports a modest valuation of around $2 billion. WeWork, though, put a spin on the old Regus plan... by pumping music through its office spaces, outfitting the offices with an “industrial chic” vibe (read: exposed wooden beams), and most important, providing free beer. No joke. Free beer. Since its founding, WeWork has lost money at an astounding rate. Even though it has doubled its annual revenue, it manages to outspend its sales year after year. For example, the Wall Street Journal reported WeWork’s 2017 revenue totaled $886 million,
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May 2019
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