In Hilarious IPO Filing, WeWork Dreams of $3 Trillion in Revenue But Has Billions in Losses. Red-Ink Massacre to Come in 2nd Half

All in next-gen corporate speak to give you the warm & fuzzies. Meanwhile, Uber hits new low, down 24% from IPO price. 

“The We Company,” as WeWork now calls itself, which is in the business of burning cash and selling “space-as-service,” has registered with the SEC to go public as soon as next month to get out through the IPO window while the getting is hopefully still good. And its S-1 filing, which became available today, depicts a company that takes corporate speak to a new level, has visions of $3 trillion in revenues, and, more realistically, has lost $4.3 billion over the past three-and-a-half years, including $904 million in the first half of 2019. But this chart doesn’t yet show the red-ink massacre to come in the second half:

The second half, if the IPO takes place, is going to be a red-ink massacre, with two components: WeWork’s regular losses and its stock-based compensation costs.

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

In Uber’s case, the IPO-related stock-based compensation costs amounted to $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, in terms of losses and cash-burn business models. This includes gargantuan stock-based compensation costs during the IPO. This, in addition to the regular loss of $2 billion or so, will give WeWork a zinger of a loss for 2019. But it may lag behind Uber for a while longer, in terms of the magnitude of its losses.

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

Where do these billions of dollars in investor money go?

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

  • “Over 500 designers and architects who work relentlessly to create spaces that are beautiful but simple, elevated but approachable, global yet locally unique….
  • “Over 2,500 trained community managers who foster human connection through collaboration and holistically support our members both personally and professionally.
  • “Approximately 1,000 engineers, product designers and machine learning scientists that are dedicated to building, integrating and automating the complex systems we use to operate our business.

Here are a few of the hilarious moments in the S-1 Filing.

Perennial losses: WeWork launched its first space nine years ago and has had ballooning losses ever since. So the distinct possibility of perennial losses gets its own place in the S-1 “Risk Factors”:

“We have a history of losses and, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability at a company level (as determined in accordance with GAAP) for the foreseeable future.”

The cash-burn is going to be “efficient.” Variations of the word “efficient” occur 64 times in the S-1 such as:

  • “Cost-efficient” for members – meaning subsidized by investors.
  • “Capital efficient” – meaning it’s other people’s money that we’re blowing.
  • “Improving operational efficiency” – meaning, we need to somehow stop the bleeding before it kills us. Though in the end, making “our business and our operations more efficient may not be successful.” And then what? Bleed out if investors stop fueling the efficient cash burn machine?

Propaganda in next-gen corporate speak. WeWork is pioneering next-generation corporate-speak, which is designed to give you the warm & fuzzies as you inhale the expressions:

  • “We are a community company committed to maximum global impact.”
  • “Our mission is to elevate the world’s consciousness.”
  • “We believe our company has the power to elevate 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 make a life, not just a living.”
  • “We believed that if we created a community that helped people live life with purpose, we could 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.”

OK, I can’t let the last one go. The word “disrupted” – as in “disrupted” the asset class of real estate – has been beaten and shredded in years of Silicon Valley startup-speak. So now, WeWork has turned this to mean, lose the most money the fastest in real estate, because that’s what it’s doing.

Revenue “opportunity” of $3 trillion with a T. It starts with the “addressable market size” – everyone in much of the world with a white-collar job. They’re all going to hopefully rent a desk at WeWork. In the end, its math produces $3 trillion a year in revenue opportunity. So that would be more than the GDP of France. And it walks you through the math:

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 approximately 255 million people.”

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

OK, you gotta think big. And since it’s other people’s money, you gotta think even bigger.

Citing data from CBRE Group and Cushman & Wakefield, it determined that companies spend about $11,700 per employee per year on average on “occupancy costs.” So it applies this $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 make on that $3 trillion in revenues. Maybe $2 trillion a year? Investors need to get ready to feed this company with some serious money to make this plan come to fruition.

Good thing that it still has a long way to go: “We have realized approximately 0.2% of our total opportunity in our 280 target 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 sought-after demographic of consumers and businesses” – and it’s going to sell the data it has on them to its “partners” so that they can inundate the hapless members with promos and ads in their social media accounts, emails, and maybe face-to-face visits or whatever. Or rather, as it says in next-gen corporate-speak, that the “members get easy access to a diverse range of high-quality products and services tailored to their needs.” And for WeWork, this activity will be “generating incremental higher margin revenue.”

Cash-out refi hype is back full-blast. And for the first time since early 2006, people are doing it in large numbers. Read… Fuel for the Next Mortgage Bust?

Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

  145 comments for “In Hilarious IPO Filing, WeWork Dreams of $3 Trillion in Revenue But Has Billions in Losses. Red-Ink Massacre to Come in 2nd Half

  1. David in Texas says:

    Argentina’s 100 year bonds are now trading at a bigger discount. Investors can split their portfolio 50/50 between We Work and Argentine bonds, to diversify and reduce their risk …

    • raxadian says:

      The difference is, even if at a big discount and even if Argentina defaults yet again, those sovereign bonds will be eventually paid. It may take a while, but it will happen. WeWork meanwhile will just turn to dust and investors will be left with nothing.

      • Javert Chip says:

        I wouldn’t be too sure of that…the recovery rate on the 2001 Argentina default was 30%

      • Pete says:

        If the stock is optionable at IPO, I might want to buy puts on day 1.

    • Scott says:

      That was beautiful!

    • Clete says:

      Hey, wait — maybe WeWork should issue 100-year bonds? Imagine the accrued losses by 2119!

    • PB says:

      This comment made my day!
      Don’t forget to throw in a basket of Shitcoins either ;)

  2. Michael Fiorillo says:

    Small-minded person that I am, I long for the day when reality disrupts the Disruptors; dreamer that I am, I long for the day when more than a few of these charlatans are sent to federal prison.

    • Javert Chip says:

      As distasteful as I find business models like WeWork, Uber, all cryptos, et al., as long as they are fully disclosed (which they pretty much are), it’s just stupid money chasing a moon shot (AKA gambling) & nothing criminal.

      Amazon is frequently given as the model for unicorns, but that’s totally wrong. After going public in 1997, Amazon’s first 5 years has 3 years of slightly negative cash flow (totaling $340M); after that Amazon has ruthlessly reinvested its cash flow in growth (ie no helicopter money from late stage investors required).

      Like Uber, if you’ve been an operating company for 10+ years and have lost ever-increasing amounts of money, totaling more than $15-20B, you’re not a business, you’re a charity that helps people get cheap(er) cab rides.

      • Michael Fiorillo says:

        It’s quite a stretch to call a company whose business model involves exploiting it workers, er, contractors, and destroying mass transit a “charity.”

  3. Kenneth says:

    And the little piggy went We, We, We all the way home…

    • TLD says:

      For Adam, it’s a lot more like: “ME, ME, ME!!!”
      You’d have to be an idiot to give your money away to a scam like this.

      • SomethingStinks says:

        But isn’t my 401K thug (aka money manager) doing that on my behalf, since he obviously knows what’s good for me.

        • Javert Chip says:

          If you default something as important as your money management to a 401k thug (or any other kind of money management thug), you deserve what you get (exception: if you’re worth more than $25M, yea, you may need some sophisticated advice).

          (Independent) adults need to have a critical mass of money management skills (not to be confused with having a Harvard MBA); it’s stunning how many don’t.

    • Gorbachev says:

      Can’t stop laughing

  4. Art says:

    Reminds me of the wishful-thinking right at the end of Tech Bubble 1.0.

    • andy says:

      So anyone opened 4% 5-year CDs while they lasted?

      • California Bob says:

        re: “So anyone opened 4% 5-year CDs while they lasted?”

        Nope, but I got a 13-month ‘one time bump-up’ @ 2.5%. Now, all I need is for the Fed to raise rates to 4% toot sweet.

      • orange cats says:

        Oh crap where was that??

        • California Bob says:

          First Tech FCU, which was originally the Hewlett-Packard employees credit union. I got perks because I deposited a chunk of funds from a house sale in the Bay Area a year ago April.

          I pounced, but I think the 12-month might have been as good or better, but the ‘one time bump-up’ sounded good when the Fed was on a rate raising bent. The 13-month must have a benefit for the bank/CU, anybody know what?

    • rhodium says:

      It’s funny to me how people think of value. No one really contemplates intrinsic value much, which is why people are surprised when the market value of something plummets and they think that it’s just like money on a table that vanished into thin air. All market value is though, is someone’s willingness to pay for something, and it only takes one knucklehead to make a transaction at some extreme amount for say a tulip bulb, and suddenly a million tulip bulb owners might think that all their bulbs could sell for that much. You could trade wework stock back and forth indefinitely with your brother for a trillion dollars a share, in theory, and both of you end up net sum zero, but everyone else sees ‘market price’ and thinks that’s what their shares are worth.

    • RepubAnon says:

      Indeed. Perhaps the We Company will add “blockchain” and “.com” to their name…

      I hope the stock certificates are printed on pleasantly-scented, soft, 2-ply paper…

  5. BearDawg says:

    So how many of these “selling ideas” companies are out there in the US? Is it 10% of the Dow? 20%? More? 9 years is a long time to feed on the yield-chasing investor trough. Sounds like they should have IPO’d a few years ago when losses equalled revenue – the “pitch” would be more believable with less history behind and an infinite future to sell. The founders could be out of the company and laughing at the market. IPO now seems dicey – but as Wolfey sez – maybe there is a last round of yield-chasers still left to fleece…..Gawd I hope not !!

    • Jon W says:

      Calls for big interest rate cuts all over the financial news. I hope you’re right but after 15 years of waiting for some sanity to return to the economy I now expect they’ll find a way continue feeding the ponzi scheme.

      I know Wolf doesn’t think govts are ultimately strong enough to prop up markets like this (eg japan) but I’m not so sure. Ban cash in the name of stopping money laundering and slap negative interest rates on everything. How much is a house worth if I get monthly negative interest payments on my mortgage? Or We Company makes a profit in five years thanks to interest earned on its debts. If you see how far we have gone along this insane path you have to accept a new level of insanity is not out of the question.

      • Rob vC says:

        In other news Earth is switching it’s magnetic poles slowly.
        Did that help?

        • Tyson Bryan says:

          We Work may be viewed as a bank of negative issue. The changes WE is imagining in the way we approach remunerative work, might be enough to reverse the polarity of our working $ currency. Three trillion negative $ revenue is a reasonable expectation.

      • California Bob says:

        My understanding of WeWork is that the (alleged) CEO–Alan or Adam Something-or-Other–front-ran and bought many of the buildings that he is essentially renting out. He’s also allowed to bail on the company any time he feels like it; it appears the endgame is to inflate the value of the properties, then unload them ASAP.

        • Arizona Slim says:

          Slim here. I was a member, er, tenant at a recently closed coworking space in Tucson, Arizona. I could never figure out the connections between the owner, leasing entity, and property manager for the place. I finally concluded that the convoluted structure was created on purpose, and front-running was at the root of it.

  6. Alex says:

    So I guess we can now expect Bay Area real estate to tank at the end of the Uber lockup.

    • sc7 says:

      Don’t tell socaljim. He’ll come in here and twist himself into a pretzel justifying why now is the time to “buy buy buy” and real estate is “to the moon Alice”. It’s only up from here.

      • California Bob says:

        Ha! Yes, he’ll tell us to buy now before the Democrats ruin the economy again.

        • IdahoPotato says:

          Since 1953, 9 of the past 10 recessions were under Republican Presidents.

          From from 1927-1933, Republicans controlled all three branches of the government when Presidents Calvin Coolidge and Herbert Hoover occupied the White House. Those were the good old days.

          An then again between 2001 and 2007, Republicans controlled at certain points all three branches while President George W. Bush occupied the White House.

          But of course, the socialists are going to ruin everything.

        • ewmayer says:

          @IdahoPotato (above): Nice bit of cherry-picking the data there. Let’s consider all 12 of of the post-WW2 recessions according to NBER, and for-better-or-worse ascribing each to the POTUS at time of start of the recession:

          Feb 1945–Oct 1945: Truman,D
          Nov 1948–Oct 1949: Truman,D
          Jul 1953–May 1954: Eisenhower,R
          Aug 1957–Apr 1958: Eisenhower,R
          Apr 1960–Feb 1961: Eisenhower,R
          Dec 1969–Nov 1970: Nixon,R
          Nov 1973–Mar 1975: Nixon,R
          Jan 1980–Jul 1980: Carter,D
          Jul 1981–Nov 1982: Reagan,R
          Jul 1990–Mar 1991: H.W.Bush,R
          Mar 2001–Nov 2001: W.Bush,R
          Dec 2007–Jun 2009: W.Bush,R

          Indeed, 9 of the last 10 under Rs. *BUT* – Mar 2001–Nov 2001 was really result of the dotcom bust, i.e. should be ascribed to Clinton, not W.Bush, douchebag though the latter might be. So you got 8 of 12 under Rs, which is suddenly much closer to 12-coin-flip odds. Further, Eisenhower was more of a lefty than today’s “centrist Dems” … And Obama didn’t exactly cover himself with glory in his response to the GFC, bailing out the crooked bank cartels, de facto immunizing them from prosecution and allowing them to steal millions of homes via fraudclosure. IOW, plenty of blame to go around. You want to shout from the rooftops about economic crimes, a better subject of your ire would be the toxic philosophy known as neoliberalism, which has been a thoroughly bipartisan effort. Interestingly Carter was the first neoliberal president by way of his anti-union efforts and Volcker’s wage-crushing policies … but it was Reagan (and his pal in the UK, Thatcher) who really weaponized it. Alan “Mr. Bubble” Greenspan and his toxic buds like Rubin and Summers epitomize neoliberalism, and Mr. Bubble was working his evil ways under both R and D presidents.

  7. Bernadette says:

    We Work has a ‘funding’ model like Tesla…A Collusion with…

    Here’s a quote and link from TechAsia. “It announced an investment of US$4.4 billion from Japanese giant SoftBank last month, brought on board a Chinese consortium led by Hony Capital, and acquired Spacemob in Singapore to drive its expansion across Southeast Asia. It partnered Bangalore real estate billionaire Jitendra Virwani’s Embassy Group to enter India in July, and redesigned a relic from the past – movie theater Galaxy – into a 145,000-square-foot co-working space.”

    • Carey says:

      What does a “co-working space” do, anyway?
      I mean, how does it get substantial amounts
      of money that might conceivably justify these
      insane valuations?

  8. ML says:

    In Uk, traditionally known as serviced offices. They come and go. Mostly go through insufficient demand. The only We i know of is a office building in central London that We has leased and spent a packet on doing up to its requirements. The landlord must be pleased to have a single tenant for the whole building, instead of as before a motley collection of different tenants. I looked at what We are offering. Cloud cuckoo land sprang to mind.

    • Tony says:

      Just had a look here in Manchester…There are four we offices and a fifth being planned… £250 a month(prob +vat) for a hot desk, £350 for your own desk and £500+ for a mini office. The pictures do look like they are very posh offices, though.. One of the wework offices is opposite Manchester Central Library, where you can hot desk for free and next to Wetherspoons pub. where you can buy a coffee for £1.50 with free refils and sit there all day…. I might walk round and have a nosy and see what you get for your buck…. People are using them but I wonder who…

      • Nicko2 says:

        Next up, work in the park with laptop/cellphone for free. ;)

        • Iamafan says:

          We’ve had that for while. It’s called the library. Free, quiet, has parking, private nooks, free WiFi, terminals, and clean bathrooms. Heck you can even renew your passport and enroll in Obamacare.

          When I want to meet someone to talk to in private, I’ve always used one of my neighborhood libraries.

          There’s a lot of IQ and books waiting.

        • Scott says:

          Up next is everyone sitting around in tents next to a cell tower.

        • Matt says:

          Out here in California, we already have that. I walk by the tent-city-around-the-cell-tower every day. It’s right under the freeway overpass and next to the railroad tracks. If I was a painter I’d already be on that; a nice juxtaposition of the rail age, the depression era, the auto age, and the age of smart phones and tech bubbles. I would title it “The Law of Unintended Consequences.”

        • NBay says:

          Pretty upscale neighborhood ya got there. Must be able to afford enough cops to whisk the homeless out quick, like Sedona, etc, does. They “shower” at our main library, and this is pretty upscale town.

        • Carey says:


          Someone please tell me how WeWork is *not* vaporware.

      • California Bob says:

        re: “The pictures do look like they are very posh offices, though …”

        When I started my tech career at Hewlett-Packard 36 years ago I had a small, semi-private cubicle, a decent–and cheap–cafeteria, clean bathrooms and, most importantly, respectful management. I was in Hog Heaven (or I was a ‘Pig in Sh*t’ if you prefer). In my experience, turning a workspace into a luxury spa doesn’t increase ‘productivity’ or ‘efficiency;’ the best workers make the best of whatever accommodations they have–they take it as a challenge.

        • NBay says:

          When I was updating some E-tech skills at local JC, HP meant “Holy Place”. Flex time, even free coffee donuts. Playmate looking receptionist. Mid ’80’s. Doing mostly network analyzers there then, I was told.

      • Mary says:

        Please do snoop around and report back.

      • Javert Chip says:

        Ok, here’s the problem:

        Coffee for £1.50 will never catch on. Ya gotta bump that up to £5-6 with some Jamaican nutmeg or New Guinea cinnamon. You know, differentiating “value add”.

        • elysianfield says:

          “Coffee for £1.50 will never catch on”


          …How much is that in real money? Out on the Left Coast of the US, Mac Donalds sells a cup, with a senior discount, for 80 cents…and free refills!

    • RepubAnon says:

      Were I the landlord, I’d avoid having one big tenant with dodgy financials who could go bankrupt and leave the entire building vacant.

      • Dale says:

        WeWork is apparently set up to do exactly this, by means of subsidiaries or shell companies established to default on leases without significant ramifications to the We company at large.

        In other words, the entire thing is built to be a scam for all concerned (customers, building owners, equity owners), except Adam and some selected recipients of the $billions in stock-based compensation.

        As an exercise in fraud, it is a masterpiece. Fortunately for Adam, the SEC no longer enforces against fraud.

  9. John Taylor says:

    I think the key to make their business model work is unlimited access to negative yield bonds.

    • MD says:

      Actually if you’re being paid to borrow…you don’t need to work at all do you, if you borrow enough?

      The problem with socialism is that sooner or later you run out of other people’s money, someone once said.

      And yet here we are. The system the person who spoke those words was a keystone in implementing has delivered us an environment wherein there’s no incentive to productive [and that’s the key adjective] work – why do that when you can borrow your way to prosperity, and cash out before it all goes pear-shaped?

      • alex in San Jose AKA Digital Detroit says:

        Public health programs
        Free public schools K-12
        Fire stations
        Roads from Interstates to local roads
        The CDC and those guys who investigate every crash by a US-made plane, anywhere.
        I could go on and on and on…

        All socialism.

        • wkevinw says:

          There are definitely legitimate government functions (or at least that have been enumerated by people like Smith for ~250 years now), roads being one for sure.

          For others, at least services, think “uniforms”- government employees in uniform are likely to be legitimate government employees (as they say). Whether they do a good job or there are too many, is a different discussion.

          Schools, libraries, and health programs are at least gray areas.

          I like the public health issue. This definitely an issue (whether we need government involvement), and those anarcho-libertarians don’t like to discuss that.

          Law (legitimate government), order and free markets create(d) the wealth we enjoy in the “developed world”.

        • HC says:

          Not socialism. Infrastructure that encourages civil peace, provides jobs and encourages a productive business environment.

      • NBay says:

        “Other People Money” was stolen from a quote by Dumas, explaining what business was. And he was famous 0.1% (or much less) businessman of his time…..among other things.

    • Unamused says:

      I think the key to make their business model work is to find the investor who enjoys having smoke blown up their ass. Unfortunately for WeepWork, those tend to succumb to renal failure.

      WeWork is pioneering next-generation corporate-speak

      Right. I could make more money sponsoring “Buzzword Bingo: the Championship Series.”

      The obvious target market would be IPO specialists and overpaid MBAs, so don’t count me out: these people have money and are into entertainment fads, even if they are susceptible to kidney problems.

      Approximately 1,000 engineers, product designers and machine learning scientists that are dedicated to building, integrating and automating the complex systems we use to operate our business.

      Which only makes sense. Second-rate professionals are having a hard time finding real jobs, so until they do they get gig work installing gimmicky office furniture.

  10. Rinaldo says:

    From Adventures in Capitalism: “The year is 2030 and the S&P just broke the 1 million level following an algo-induced short squeeze after Trump tweets, “President Ivanka headed to China to negotiate an even better deal for USA. Chinese seriously intimidated because she’s hot.” It has now been 12 years, a trade deal is nowhere in sight and despite a global economic collapse, the market still rallies 2% every time Trump tweets that a deal is close—which happens just about every day. The occasional down days are the result of rumors that the UK has scrapped yet another BREXIT plan.

    The Russell 2000 officially announces that during its annual re-balance, it will remove all profitable companies as “no one wants to own those anyway.” Going forward, the only requirement for index inclusion is a 5-page corporate presentation showing how your business has a TAM of at least 1% of global GDP.

    In other news, the Federal Reserve is debating if they should lower the Fed Funds rate another 100bps to negative 101% and break the “neg 100 barrier” in order to achieve their 2% inflation target. A loaf of bread now costs USD $100 million but the Fed stands by their excel model known as “OFFICIAL HEDONICS MODEL_everyone_please_work_off_this_version_v9” Despite millions of hours of billable work, McKinsey still cannot figure out how to fix the circular reference that keeps crashing the 2,000 tab model.

    Tesla is the most valuable company on earth. In 2023, Musk chose to exit the car business by locking the doors to the Fremont factory and setting it on fire. Due to shoddy record-keeping, no one knows how many workers died in the worst work-place tragedy in US history. CFO Zach Kirkhorn’s crayon on construction paper count system is indecipherable to investigators. After Musk tweeted that, “they all said they were willing to die for The Mission,” the US government drops all investigations into the fire and Musk re-focuses Tesla’s business model entirely on tweeting rumors that the Flying Saucer Reveal Event is coming soon. Algos panic buy Tesla shares every time he tweets a saucer GIF. Analysts regularly upgrade the stock based on his creative use of emojis. Thousands of innocent pedestrians are killed each year by legacy Teslas on auto-pilot. No one in the NHTSA seems to care as “getting Tesla’d” enters the global lexicon.

    • California Bob says:

      Brilliant! Please write a book.

    • Petunia says:

      The best thing I’ve read in a long time.

    • Rcohn says:

      It is 2030. The S+p has yielded negative returns(including dividends)since 2019. Every single IPO since 2018 ,except Levi Strauss ,no longer exists.
      San Francisco housing prices are back to 2010 prices as some of the biggest employers have been broken up by government anti trusters and China having banned capital moving outside the country.
      Overseas , the Eurozone has continued to struggle after its disintegration in 2023.
      China has become a military dictatorship after the US destroyed Spratly island after China fired upon a US ship.The US has banned imports from China and Apple has built a highly automated factory in UT.

      • Tonymike says:

        Dream on chinaphobe. Why would China become a military dictatorship, esp after the so called destruction of some barely above water, isles and atolls? The US is more likely to fire at a Chinese ship as well. The more likely scenario is the US becomes a dictatorship after leaving Afghanistan, watching China invade Taiwan and does nothing, and the market fails because of all the fraud of WeWork and it’s ilk.

        • MarkinSF says:

          Why would China become a military dictatorship? The answer seems pretty obvious to me. Maybe you should read up on China as it existed in the 1940s-1950s.

    • PB says:


  11. MD says:

    “We have a history of losses and, especially if we continue to grow at an accelerated rate, we may be unable to achieve profitability at a company level (as determined in accordance with GAAP) for the foreseeable future.”

    SOLD – sign me up!

    All these ‘profits’ are so boringly 20th century.

    I’ve got a oiled beard and a sleeve tattoo and if it isn’t losing billions per year, it’s obviously not ‘sexy’ enough and I’m just not interested.

    And the central bank will soon help me out if things go wrong, right?

    Yes, I’m smart and so I’ll leave all that ‘profit’ stuff for the factory owners in China, with their risible ‘production and export’, thank you very much. Losers.

  12. KPL says:

    Just replace Argentina with WeWork in your recent post and you have a headline for a future post…

    “Brain-Dead Investors Get Crapped on Again by Argentina
    by Wolf Richter • Aug 12, 2019 • 102 Comments • Email to a friend
    They had it coming.”

  13. Tim says:

    Are these companies really in the business of selling office space, rides and so on – or is their model really about selling stock?

    If it’s the former, they’re idiots.

    But, seeing as they become remarkably wealthy idiots, perhaps not so crazy….

    • Javert Chip says:

      A lot of it has to do with buying the CEO’s commercial real estate, which used to be considered a somewhat shady practice.

      Fortunately, WeWork has transmogrified this into a cool strategic practice, neatly recycling WeWork investments into CEO personal wealth.

  14. David Hall says:

    WeWork acquired office leases, subdivided them and sublet smaller office spaces. They have competition from a profitable company named Regus. Some entrepreneurs turned a spare bedroom into a home office. Telecommuting – teleconferencing software might reduce office expense.

  15. Craig says:

    Did the S-1 talk about WE’s shady CEO that personally bought commercial real estate to lease it to WeWork and have the company pay for the remodel?

    • Wolf Richter says:

      Yes, at the bottom of “Risk Factors”: Here is the quote:

      We have entered into a number of transactions with related parties, including our significant stockholders, directors and executive officers and other employees. For example, we have entered into several transactions with our Co-Founder and Chief Executive Officer, Adam Neumann, including leases with landlord entities in which Adam has or had a significant ownership interest. We have similarly entered into leases with landlord entities in which other members of our board of directors have a significant ownership interest, such as through ARK (as defined in “Business—Our Organizational Structure—ARK”). See “Certain Relationships and Related Party Transactions”. We may in the future enter into additional transactions with entities in which members of our board of directors and other related parties hold ownership interests.

      Transactions with a landlord entity in which related parties hold ownership interests present potential for conflicts of interest, as the interests of the landlord entity and its shareholders may not align with the interests of our stockholders with respect to the negotiation of, and certain other matters related to, our lease with that landlord entity. For example, conflicts may arise in connection with decisions regarding the structure and terms of the lease, tenant improvement allowances or termination provisions. Conflicts of interest may also arise in connection with the exercise of contractual remedies under these leases, such as the treatment of events of default.

      Our leases with landlords generally provide that, if the landlord declines to reimburse us for buildout expenses or other tenant improvement allowances for which we have the right to be reimbursed under the relevant lease, we may apply such receivables as an offset to our related rental obligations on those impacted leases. Certain of our leases with related parties, including those with landlord entities in which Adam holds a significant ownership interest, provide for tenant improvement allowances. If any of these entities declined to reimburse us for buildout expenses to which we were entitled under the relevant lease, we expect that we would apply such receivables as an offset to our related rental obligations on those impacted leases.

      Pursuant to our related party transactions policy, all additional material related party transactions that we enter into require either (i) the unanimous consent of our audit committee or (ii) the approval of a majority of the members of our board of directors. See “Certain Relationships and Related Party Transactions—Policies and Procedures for Related Party Transactions”. Nevertheless, we may have achieved more favorable terms if such transactions had not been entered into with related parties and these transactions, individually or in the aggregate, may have an adverse effect on our business and results of operations or may result in government enforcement actions or other litigation.

  16. Crush the peaants! says:

    What need does WeWork fill? Unless you are homeless, why can’t you work in a home office?

    What will kill the stock market is opportunists lacking even a credible story crawling out of the woodwork to grab the money while the getting is good.

  17. FrederickWM says:

    Wework just took a lease on three full floors of a building in the exploding Wola district of Warsaw Their startup scene is bursting at the seams from what I heard Lots of young Israelis have discovered Warsaw and are owing there for the standard of living Things are looking good

    • Rcohn says:

      Funny. The Polish government has suspended income taxes on younger workers in order to stem the emigration towards Western Europe.

  18. Down2Earth says:

    Isn’t it high time that someone points out that the Emperor ain’t wearing any clothes !!!!

    • 91B20 1stCav (AUS) says:

      D2E-thankfully, this is what Mr. Richter has been doing from the get-go. Unfortunately, not nearly enough of the populace understand, are interested or believe their own eyes when that point is illustrated…

      A better day to all.

    • steppenwolf says:

      May I point out that there ain’t no Emperor.

  19. Lou Mannheim says:

    “We have realized approximately 0.2% of our total opportunity in our 280 target cities“

    Hey now, that’s a familiar market share number!

  20. Tim says:

    I can’t believe people fall for this stuff. Exploration of the dumb.

  21. Iamafan says:

    When I was younger, there used to be a word I heard more often – schiester. Probably not PC today.

  22. RD Blakeslee says:

    “Revenue “opportunity” of $3 trillion with a T. It starts with the “addressable market size” – everyone in much of the world with a white-collar job. They’re all going to hopefully rent a desk at WeWork.”

    From the tone of the article, I infer Wolf won’t rent a desk …

    • Wolf Richter says:

      The WOLF STREET media mogul empire rents its huge and luxurious global headquarters facilities from the Richter household. And WeWork will never be able to compete.

      • RD Blakeslee says:

        WeWork won’t work for “Grandfather”, neither.
        His desk is an old oak roll top – used to be in a railroad dispatcher’s office.

        His workspace is an old china cabinet converted to hold a CPU, printer etc.

        The roll top is “storage” space (“storage” used loosely – both the word and the space)

        • Xabier says:

          I do ‘hot desking’ on my own property, all paid up: sometimes in the shady spot under the laurels; at others, in the full sun.

          And my most creative thinking is always done on the sofa with the dog at my feet.

          The office furniture is all either second-hand about 100 years old, or made by myself a the cost of nails and screws.

      • Clete says:

        But do you have gold-plated beer taps, or a Kombucha-on-demand dispenser, or whatever they spent the money on?

      • NBay says:

        Just curious about your Empire,
        Are you still sending your self driving Porsche over to Pelosi’s house from time to time, and leaving it parked there till dawn? Or do you even remember admitting to that part of your overall empire building plans at all?

        • Wolf Richter says:


          Pelosi and I go back a long way: She has ignored me from day one, and I have refused to vote for from day one (she lives in my district, so to speak).

          Entrenched power is such that she doesn’t even have to campaign here. She just sends out one little flyer right before the election, just as a reminder who’s boss, and that’s it. No one of significance ever bothers or dares to run against her :-]

    • intosh says:

      I’m old enough to witness Infospace CEO (C for “charlatan”) predicting his company will have a $1T market cap, circa 2000.

      Here we go again…

  23. Tim says:

    One thing which surprises me somewhat is that companies are allowed to create differing classes of shares in a way loaded in favour of insiders and early investors, and de facto against public investors.

  24. AGXIIK says:

    WeWork merges with Uber
    New name
    Uber won’t work
    The only way Uber will ever make money is Uber Eats delivers Soylent Green. They charge double. Soylent Green is people
    One fare to deliver people
    One fare to deliver food

    • Unamused says:

      One fare to bring them all and in the darkness bind them.

    • josiea says:

      Youre onto something here (or at least on something ;)). Maybe they incorporate legal pot/cbd in the mix and merge with Uber, go all in on AI so robots deliver food and call it We(ed)+Eats. Most of the loser stoners will turn themselves into soylent green, having had their laziest impulses enabled by this new megacorp.

  25. IslandTeal says:

    Wolf…. Well written and one more great example of the “stock is the product” business model. We Work is a totally unnecessary company.

  26. WT Frogg says:

    ” Unicorns, bullcrap and Koolaid….Oh my !!! ” or in other words : ” Run away, run away !! ”

    Tip of the hat to Wizard of Oz and Monty Python.

  27. Paulo says:

    Terrific article. It’s amazing how Mr. R can write about something so serious with such an engaging and funny tone. I wanted to cry, but just smiled. However, neck is pretty sore from shaking my head. This is the kind of industry and economy spawned by MMT, pure and simple.

    “When you get something for nothing, you just haven’t been billed for it yet.” Franklin P. Jones

  28. Just Some Random Guy says:

    100 treeeeelion dollars?

  29. roddy6667 says:

    One of the first things to collapse in a recession is commercial office space. WeWork will be like a house of cards in a 9.0 earthquake.
    I have my recliner and some popcorn ready. I love to watch these things.

    • GirlInOC says:

      I drove through Los Angeles this weekend on the 5. It was hard to miss the gigantic signage on the empty commercial offices/retail spaces…”free rent for a year!”

    • Wolf Richter says:


      An interesting thing is that all these WeWork office spaces are set up each in their own legal entity. In the US, it’s usually LLCs. So WeWork can default on the lease, and the landlord can only go after the LLC, which has nothing at that point. So the thing to watch is how landlords deal with this, because they too are leveraged and need to make mortgage payments. So make sure you have enough popcorn on hand when that happens :-]

  30. Just Some Random Guy says:

    I worked for a startup that had the same silliness math when it came to potential revenue. It was something like “take every human on earth and if we just get 1% of them to use our product we’ll have a gazillion dollars of revenue”. Uhm yeah, cool, sounds easy enough I suppose. 1% is like nothing man!!

    That company never made a $1 of profit. We were bought out by a mega-corp though for a few hundred million. Everyone’s stock options went through the roof, we were all happy. We also kept laughing at our new overlords for paying so much money for a POS product that never really worked.

    That’s how the game is played. The problem for We Work is they got too big and too expensive to be bought. Now they have to scam thousands of investors, not just a handful of executives from mega-corp.

  31. c1ue says:

    A minor quibble:
    while stock option compensation is a paper loss for the issuing company, it is not an actual cash loss – in fact, it is a cash earner.
    The billions of stock option “losses” Uber just reported will reduce its income taxes paid – this, along with “R & D” credits is exactly how so many tech companies have avoided paying any tax despite being profitable.
    I would suggest that using cash burn as a proxy for the viability of a business, makes more sense.
    As for WeWork itself: as I understand it, they have an interesting model: every building is a separate company, owned by the WeWork parent. While this serves as a way to ring-fence losses from any individual property from the rest, it also potentially enables all manner of Enron-esque accounting shenanigans.
    Time will tell how this turns out.

    • Clete says:

      Yep, but I think you mean “GE-esque accounting shenanigans.”

    • Wolf Richter says:


      It’s not that simple.

      Shares are a currency with which the company can buy stuff, such as other companies, or pay for things like labor (stock-based compensation).

      The company prints this currency. So there is no US-dollar cost. But like all currencies, there is the problem of monetary inflation — or dilution. So existing stockholders pay a heavy price because they own less and less of the company.

      Hence share buybacks: company spends US dollars to buy its own shares in order to cut down the dilution of stock-based compensation. Share buybacks are not expensed either, but are real cash dollars.

      So here is the cycle: company issues (non-cash) stock-based compensation which dilutes existing stockholders. To reduce dilution, company then spends (real-cash) dollars to buy back its own shares. And on net, the dollar amount of share-buybacks used to avoid dilution is the true dollar cost of stock-based compensation.

      WeWork won’t buy back its own shares because it keeps losing money. So it cannot deal with dilution from stock-based compensation. However, it spends a real currency (its shares) to pay for its labor, and this real but non-dollar-cash expense for shareholders needs to be accounted for in dollar term. Hence the rule to require companies to calculate and expense the true cost of paying for its workforce.

      • Broken Clock Capital says:

        So management won’t dilute shares til after the lock-up period, no problem for them…

      • c1ue says:

        You are right, of course, that dilution of shares “can” have an effect.
        However, I would posit that stock buybacks are not really about offsetting dilution so much as outright financial engineering of per-share performance metrics.
        However, the main point I made is still valid: the dilution or lack thereof for a given company’s stock has zero impact on its actual operations.
        Yes, dilution can affect ability to borrow – which matters for companies like Tesla – but it doesn’t actually matter for companies that actually have profitable businesses. You yourself note that the dilution affects other stockholders – which may or may not be the business – but most importantly doesn’t impact the amount of cash a company has. It is this cash (or lack of) which causes companies to fail – not any amount of dilution.
        Put another way: Uber’s stock option obligations – the accounting loss has no negative impact on its bank account, in fact is a positive cash impact both in that the options granted should reduce overall payroll and that exercised options will provide tax writeoffs for other income.

    • sierra7 says:

      See my reply to WR above…..I believe Andy Fastow is somehow involved!” LOL!

  32. nick kelly says:

    Re: the target market of 3 trillion, based on the costs of about 11 thou per office worker, which We will disrupt and steal away from the present locations of the workers.

    The model here resembles Burger King going after McD or Dollarama going after Walmart. The customer stops going to A and goes to B.

    However, the office space of large and medium corporations is not on a month- to- month basis. Many own their buildings or have long term leases.

    We’s target market is not office workers, it is the gig workers. Does their estimate reflect this?

  33. tommy runner says:

    WeWee, GEwhiz, all the same to the remora.

  34. daniel weise says:

    I hear the Ticker for the upcoming IPO will be WHML. The Company will go live as “WeHomeless”.

  35. CreditGB says:

    So I give these guys my money for shares of stock. They lose billions, assume including my money. There is no prospect for a profit let alone a dividend.

    Can anyone tell me how this is good for me as an investor?

    Is there an opportunity for existing stockholders to cash out during the IPO “Scheiße Sturm”?

    • Wolf Richter says:

      This is good for you as an investor only if I’m the greater fool and buy those shares from you at a much higher price, hoping that I can later dump them into the lap of an even greater fool. That’s how this work. The fools make money until they run out of greater fools.

  36. Javert Chip says:

    Unfortunately, by asking these kinds of questions, you have conclusively demonstrated you are not a WeWork kind of guy. Plainly, you are in no shape to surf the zeitgeist.

    Please just move on down the road, you’re holding up the line behind you.

    • Arizona Slim says:

      Slim here. Again.

      And I’m probably one of the few people on this thread who has actually been a coworking space member. I belonged to one in Tucson, Arizona, and it closed at the end of June.

      During the summer of 2018, I noticed that the boss lady was turning into quite the WeWork fangirl. Well, you know me. I read blogs like this one, and I felt that I had a duty to warn her about that place.

      So, I posted a link to a Wolf Street article as my comment to one of her LinkedIn posts about WeWork. I figured that she needed to know the truth.

      Well, fat lotta good that did. In February, she and her two subordinates quit their jobs at the Tucson coworking space. Her reason for leaving was the same as theirs: She was getting a new job.

      The two subordinates stayed in Tucson, but the boss lady was headed out to the coast for a job at …

      … WeWork.

      I couldn’t shake the feeling that things weren’t going to end well. And, Wolf, you just confirmed my suspicions.

      As for the three coworking space staffers who quit their jobs back in February, only two were replaced. The sales and marketing manager was not. To me, that was a clear sign that this Tucson space wasn’t going to be around much longer.

      At the beginning of May, I was told that the place would be shutting down. No big deal for me, because I have a home office that suits me just fine. However, some of the other tenants were really in a fix because they had to find new office space on short notice.

  37. Just Breath says:

    For the love of God, relax, the IPO funding has a purpose and shareholders need to just F’ing breath:

    And any perceived business concerns, real or imagined, haven’t dissuaded WeWork’s top execs from investing their healthy personal earnings into luxury real estate. Take CEO Adam Neumann, who recently inked a $35 million deal for a four-unit Manhattan spread. And then there’s vice chairman Michael Gross, who earlier this month forked over exactly $28 million for a remarkably fancy tennis court estate in Brentwood, out on L.A.’s perennially desirable Westside.

  38. Broken Clock Capital says:

    I dunno, all these soon-to-be-broke hipster entrepreneurs will need a place to live, and a WeWork cube is probably cheaper than a studio apartment.

    But they’ll need to change mission statement from “Elevating the world’s consciousness” to “Housing for the metrosexual homeless!”

  39. Lars says:

    This today from the online Spaceport America news bureau, located in New Mexico.
    (I quote briefly from their email of today)

    “Virgin Galactic unveils ‘Gateway to Space’ building at New Mexico’s Spaceport America”

    “The first floor is focused on our home planet, and is named Gaia, representing the point of departure and return, . . Gaia is subtly and unobtrusively zoned into practical, formal and informal spaces, which will host the space operations team, Future Astronauts and their family and friends. It serves as the social hub of the building, where everyone is part of the Virgin Galactic family; . . ”

    “The second floor is named Cirrus, representing light, air and flight. It is the beating heart of spaceflight operations, and is connected to the community hub of Gaia below through a double height atrium. The color palette graduates from the earthy tones below in Gaia to lighter white and grey shades, reflecting the skies beyond and providing a clean environment supporting operational focus. This area is home to Mission Control, the Mission Briefing Room, the Pilot Corps and the rest of the Flight Operations team.”

    “The unveiling of Gaia and Cirrus brings to life a beautiful, world-first and world-class facility and means that Spaceport America’s Gateway to Space is now functionally operational, . . ”

    So inspiring ! I do applaud their efforts and accomplishments, but !!! now all we need is the ability to ‘go into Space’ !! LOL

    I see this ’email news’ which arrived today from Spaceport America, news of what they are doing, and I’ve been following their exploits for at least 3 years now, this IS great news, however, like the above article on WeWork, SA’s dreams and promoting language goes far beyond what is able to be done today, and very likely EVER ! Just like WeWork, SA is ‘dreaming big time’ !
    There’s nothing wrong with ‘dreaming big time’, but you do need to be able to ‘deliver’ someday. And as far as ‘going into Space’ for a ‘space enthusiasts holiday adventure’ to Saturn or maybe even to Neptune, it’s going to be 100 years before we even get as far as back to our own Moon ! Taking the human body into Space is way to demanding and expensive due to the necessary environmental requirements. (Go ahead, prove me wrong !)

  40. CreditGB says:

    I think i will take some earlier advice and just move on from this subject. It is just too bizarre.

  41. Jeff T says:

    “The problem is all inside your head”, she said to me
    The answer is easy if you take it logically
    I’d like to help you in your struggle to be free
    There must be fifty ways to lose your billions.

  42. Graeme Horne says:

    Hilarious reading, thanks Wolf

  43. Andrew says:

    Q: What’s the fastest way to make a million dollars in the stock market?
    A: Invest TWO million in any WeWork offering (stock, bond, building, whatever).

  44. Leser says:

    Always love the Wework updates, and fantastic comments :-D

    As for Wework, I really wonder why they lose so much money. The prices aren’t low and local competitors are profitable or at least don’t lose nearly as much. From anecdotal experience utilisation seems alright even for recently opened branches in already well-supplied areas.

  45. kate sweat says:

    WeWork landlord, spooked by scrutiny over IPO filing, sues to get out of lease
    The owner of 21-33 Irving Place said it followed media reports that “cast great doubt on the financial viability” of startup

Comments are closed.