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Home / Business / In fun IPO filing, WeWork dreams $ 3 billion in revenue, but has billions in losses. The red-ink massacre comes in the second half

In fun IPO filing, WeWork dreams $ 3 billion in revenue, but has billions in losses. The red-ink massacre comes in the second half



Everything in the next generation company talks to give you the warmth and fuzzies. Meanwhile, Uber is hitting new lows, down 24% from the IPO.

"The We Company," which WeWork now calls itself, which is about burning cash and selling "space-as-service," has registered with the SEC to go public as soon as next month to get through Hopefully the IPO window while few are still good. And the S-1 filing, which became available today, depicts a company taking its business to a new level, has $ 3 trillion in revenue, and more realistically has lost $ 4.3 billion over the past three-and-one – six months, including $ 904 million in the first half of 2019. But this chart does not yet show that the ink massacre will come in the second half:

Second half, if the IPO takes place, will be a red massage two-component inks: WeWork's ordinary losses and its stock-based compensation costs.

In 2018, the loss of nearly $ 2 billion throughout the year was 2.6 times greater than the loss in the first half. So it's likely that full-year losses in 2019 will be more than double the $ 904 million loss in the first half. So maybe a regular $ 2 billion loss. Then there are the costs of stock-based compensation during the IPO. So let's see.

In Uber's case, IPO-related stock-based compensation costs totaled $ 3.9 billion, giving the company a net loss of $ 5.2 billion in the quarter, which exceeded revenues by $ 2 billion.

Both companies have a lot in common when it comes to losses and cash-burning business models. This includes giant stock-based compensation costs during the IPO. This, in addition to the usual $ 2 billion loss or so, will give WeWork a zipper of a loss for 2019. But it may hang after Uber for a while longer, in terms of the size of the losses.

Uber [UBER] shares fell 6.8% today to a new low of $ 33.96, down 24% from the IPO. The WeWork people see this as well, and they are now in a hurry to sell shares to the public at the maximum possible price, while they still can.

Where do these billions of dollars go in investor money?

WeWork spends a lot of money fixing up office properties, making cool little ones out of boring big ones. So some of that money goes to building these properties, and some of that money goes to people.

  • "Over 500 designers and architects who work relentlessly to create spaces that are beautiful, yet simple, high, yet accessible, global, yet locally unique …
  • " Over 2,500 trained community leaders who promote human connection through collaboratively and uniquely, our members support both personally and professionally.
  • "About 1000 engineers, product designers and machine learning researchers dedicated to building, integrating and automating. the complex systems we use to run our business.

Here are some of the fun moments in S-1 filing.

Perennial loss: WeWork launched its first location nine years ago and has had balloon losses since then. So the distinct possibility of multi-year losses gets its own place in S-1 “Risk Factors”:

“We have a history of losses, and especially if we continue to grow at an accelerated rate, we may not be able to achieve profitability at the corporate level (as determined in accordance with GAAP) for the foreseeable future. "

Cash burning will be" efficient. " Variations of the word" effective "occur 64 times in S -1 as:

  • " Cost effective "for members – meaning subsidized by investors.
  • " Capital efficient "- meaning it is other people's money that we blow.
  • "Improving Operational Efficiency" – meaning, we must somehow stop the bleeding before it kills us, although ultimately it is not possible to make "our business and our business more efficient." ? Soft if investors stop filling up with the efficient cash-burning machine?

Next-Generation Company Propaganda Speaks. WeWork is pioneering next-generation enterprise talk, designed to give you the heat and fuzzies when you inhale the terms:

  • "We are a social enterprise committed to maximum global influence."
  • "Our mission is to raise awareness of the world. "
  • " We believe our company has the power to lift how people work, live and grow. "
  • " We are reinventing the way people work and transforming the way individuals and organizations relate to the workplace. "
  • " Nine years ago, we had a mission to create a world where people work to live, not just to live. "
  • " We believed that if we created a society that helped people live life with purpose, we can have a meaningful impact on the world. "
  • " We are changing the way people work globally, and in the process we have disrupted the largest asset class in the world – real estate. "[19659028] OK, I can't let the last one go. The word" disturbed "- as in the" disturbed "asset class for real estate – has been beaten and shredded for many years with the Silicon Valley startup. So now WeWork has made this sense , loses the most money the fastest in real estate because that's what it does.

    $ 3 trillion "opportunity" revenue with a T. It starts with the "addressable market size" – all in big parts of the world with a white-collar job, hopefully they'll all rent a desk at WeWork, and eventually maths $ 3 trillion a year in revenue, so that would be more than France's GDP, and that leads you through the math: [19659004] In the 111 cities globally where it now has locations, and in the 169 cities where it wants to open locations in the future, there is, it says, an "estimated potential member population of about 255 million people. "

    It then uses its" average revenue per WeWork membership for six months to June 30, "to the 255 million people in the 280 cities and finds that" an addressable market opportunity of $ 1.6 trillion. "

    OK, you have to think big. And since it's other people's money, you have to think even bigger.

    I quote data from CBRE Group and Cushman & Wakefield, it decided that companies spend about $ 11,700 per employee per year, on average, "occupancy costs." So it goes to these $ 11,700 to its 255 million "potential members" to come up with "a total opportunity of $ 3.0 trillion."

    But now imagine the losses it would give it $ 3 billion in revenue, maybe $ 2 trillion a year? Investors need to get ready to feed this company with some serious money to get this plan fulfilled.

    Good that it still has a long way to go to go: "We have realized about 0.2% of our total opportunity in our 280 targeted cities globally, and even in our ten largest markets we have only 0.6% penetration today."

    So the trillion dollar losses will have to wait.

    And the 255 million potential members will be fed to advertisers. WeWork knows a thing or two about its members – "a demanding demographic of consumers and businesses" – and it wants to sell the data it has to its "partners" so they can flood the unhappy members with campaigns and ads in social media accounts, e-mails and maybe face to face or whatever. Or rather, as the next general's corporate-speak states, "members easily have access to a diverse range of high-quality products and services tailored to their needs." ”

    Refin hype with payout is back in full. And for the first time since the beginning of 2006, people are doing so in large numbers. Read … Fuel for the next mortgage loan bust?

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