WeWork IPO, the Straw that Breaks the Stock Market’s Back? Valuation Plunged by up to 79%

“They’re Going to Screw Up the Market”: Jim Cramer, on the moment-of-truth effects of the WeWork IPO.

Much like the Fed, as some would say, Jim Cramer has a dual mandate: to entertain and to pump up the markets. He is certainly excellent as an entertainer. But this morning on CNBC’s “Squawk Box,” he let bleed through just how concerned he is about the stock market that is teetering at the top to such an extent that a single, messy, overhyped company going public will “screw up” the entire market.

He wants the WeWork deal “to go away,” he said. “I don’t want WeWork. I mean, I don’t want WeWork at any price.”

There are not many companies that rushed toward an IPO with bigger pre-IPO losses than WeWork – Uber might have been the only one.

But what’s killing the appetite for this deal isn’t just the mega-losses currently, and more mega-losses forever until the money runs out – here I vivisect its earnings report: How Can a Company with $1.8 Billion in Revenue Lose $1.9 Billion? WeWork Shows How. And it isn’t just that the prices of Uber and Lyft shares have plunged 29% and 48% from their respective peaks since their IPOs.

It’s the entire approach by WeWork CEO Adam Neumann to totally control the company and rip off shareholders with self-dealing in little and big ways.

Today, WeWork – under its new moniker The We Co., announced plans in its amended IPO filing (S-1/A) to list its shares on the Nasdaq. In an IPO, new investors are buying shares that the company and/or insiders sell, and via this tactic, insiders can unload some of their shares and the company can raise a ton of new money from new investors to burn – and burn is exactly what WeWork will do with it.

A month ago, I pooh-poohed WeWork’s initial IPO filing: In Hilarious IPO Filing, WeWork Dreams of $3 Trillion in Revenue But Has Billions in Losses. Red-Ink Massacre to Come in 2nd Half. But I won’t do any pooh-poohing today, I’ll let Cramer do it. He’s a lot more colorful than I am.

But one thing I want to point out: The collapsing “valuation” of the company as figured by the future IPO price. Just about every day, there is a new number, and investors refuse to nibble, and then there’s a lower number the next day, and it’s lower by the billions from the prior number, and investors still refuse to nibble. And then there’s an even lower number, as if it were a race to heck, where this stock belongs.

As private company, WeWork was “valued” at $47 billion. Meaning that at the last round of fund-raising, investors that put money into the company did so by paying a price per share that valued the overall company at $47 billion. All this is a lot of hocus-pocus negotiated behind closed doors, whose purpose is to stir up a feeding frenzy among the next batch of investors, now including IPO investors.

By this morning, the IPO valuation had fallen to “as low as” $10 billion, according to leaks dutifully reported by CNBC, Reuters, and elsewhere. From $47 billion to $10 billion would be a collapse in value of 79%.

Cramer is worried that this misbegotten deal that goes “down, down, down,” as he said, will single-handedly take down the market that he’d labored years to pump and hype. And this is what he said on CNBC:

“We don’t want that deal. I wish they would just go away.”

“I just want it to go away. I don’t want WeWork. I mean, I don’t want WeWork at any price. It’s too top of the world.”

“It sounds like, ‘what a crybaby,’ but there are certain deals that come, and they can just really take the air out of any market.”

“They can just say, ‘we’re awful, and we’re just going to wait until we’re good again.’ Why do they just have to keep going down, down, down [with the IPO price]?

CNBC co-anchor: “Because they need the money.”

“I know, but we don’t want to give them money. They’re just going to screw up the market.”

And he exhorted whoever was viewing the show: “Will you stop the WeWork deal, please! Let’s stop WeWork.”

That’s how worried Cramer is that this misbegotten WeWork IPO deal, all on its own, can be the final straw that breaks the market’s back – that’s how overloaded with hype and ludicrously priced stocks that market already is.

A rout in the hyper-inflated bond market can blow up everything at this point...  THE WOLF STREET REPORT: Here’s What I’m Worried About, and It’s Not a Recession

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  152 comments for “WeWork IPO, the Straw that Breaks the Stock Market’s Back? Valuation Plunged by up to 79%

  1. Reality says:

    A fraudulent IPO for a fraudulent Company for a fraudulent Market.

    • raxadian says:

      At least is not the Euro Zone.

      • Reality says:

        WeScam brought to you by the United Scams of America.

      • zoomev says:

        Trump wants negtive interest rates. Don’t laugh.

      • van_down_by_river says:

        Draghi could cut them a check if he thought it could harm the asset bubble. He has deep pockets (bottomless in fact). There is an endless supply of Euros to burn on worthless IPO’s.

        Cramer needs to stop worrying and accept that the market has been flooded with more than enough printed cash to buy up any and all zombie companies – current and future.

        Besides, maybe now We Co can sue Cramer for damages to raise the money.

    • Bam_Man says:

      Yup. That about sums it all up.

    • For a fraudulent market media cheerleader Anything Cramer “doesn’t” like piques my interest. “Bad for the market??” Get on board….

  2. Marcus says:

    I’ve been driving past the nice looking WeWork building in northern San Diego and laughing at the fact that the lighted sign has some blown bulbs and reads as a massive “WeWo” when it’s dark outside. Fortunately they’ve remedied the issue. By turning the entire sign off. Seems like a big time operation when they have the same building maintenance urgency as a roadside “otel”.

    • Paulo says:

      I heard this lady trying to potty train a young boy by saying, “Come on, time to go we we. Let’s go we we”.

    • Bob says:

      If they’d read the latest memo from HQ, all they had to do was to remove the bulbs from Wo.

    • lisa says:

      They sure can’t compete with “WAWA” in PA. on any level!!! Hopefully, WAWA can keep churning food sales for a good while still…..

  3. 2banana says:

    The peak of a bubble is easy to see in hindsight.

    This may be the peak seen in real time.

    There are so many Zombie corporations nowadays.

    The implosion should be epic.

    • BrianZ says:

      It will be interesting if Wolf and others help compile a list of Zombie companies. I m sure it will attract a great attention.

    • John Taylor says:

      I still think the market in general will go up a bit more before it goes down. I’ve been playing the options market with a timeframe of a week to a couple months, and from this perspective timing is clearly everything.
      Right now I’ve got puts in 5 companies (mainly growth sectors like DOM, LYFT, INTC) and calls in 8 companies (mainly defensive like utilities and staples which I expect lower rate hype would help). It went great with the volatility in August, but this last week it’s been struggling a bit as the market stays flat with risk-on advancing and defensive declining … specifically because my picks are all momentum based and momentum as a strategy has been consolidating (see MTUM as a good proxy). Call options on utilities this last week we’re crazy cheap so I added a bit there.
      I’ve been learning a lot about the market going through this exercise (these are small bets just so you know, I’m an amateur individual investor dipping my toes and learning). Here are some things I’ve learned over the years if you’re interested in the markets…

      1. Be very careful about calling a top. Many investors called the dot com bust, the housing bust, etc. too early and lost a lot of money. The guy in “The Big Short” almost lost everything.

      2. The market is not efficient in the intermediate term. There are big institutional players that have to invest in something at all times, and their strategies tend to work out over long periods creating fairly predictable intermediate market moves. Stock buybacks are similar in creating buying pressure over a period of time rather than all at once. This is why momentum works for the most part, as long as you’re aware that momentum can and will change.

      3. The rules can change overnight, just like the March 2009 low was marked by the change from mark-to-market to allow mark-to-model accounting. This makes it impossible to predict the exact moment of change without significant insider knowledge.

      Whatever you may thing about the ineficacy of central bank craziness, there is no doubt that it affects asset prices. Trump clearly wants to boost stocks during the election year so he’s not only pounding on the Fed, but tweeting about additional tax cuts. Anything can happen in the market – I’m most comfortable with the bet that it will be more volatile (note that I don’t like volatility ETFs because of their money-bleeding structure over time).

      Anyway, enough rambling … last thing I want to say is you really have to keep an open mind with the possibilities because a collapse won’t happen 2008-style when the governments and central banks react with that in mind. That doesn’t mean a crisis won’t happen, but it will most certainly look different from the last one.

      • Jgoa says:

        Good post.

        Not sure what you make of the purported great rotation from Momo/defensive/TLT/gold to value but I’m not buying it. Feels like the algos pumping up another sector before leaving the bag for others to hold.

        If you think of what’s been hot the last 6 to 9 months it doesn’t really make sense. We’ve had stocks make highs in July, long treasuries make (price) highs, and somehow so has gold. Historically these asset classes have low correlation so basically at least one perhaps two of these classes are going to cause some big disappointment.

        Calls on defensive stocks do get cheaper when growth gets hot. Always best to buy when it becomes less attractive.

        Do agree about top calling. Wasn’t it Greenspan who famously said there was some irrational exuberance but it turned out to be a couple of years too early and the tech bubble got even more swollen.

        I think we’ll also see something different than 2008. On the one hand I suspect it won’t be as bad purely from a bear market drop standpoint. It could be covenant light loans with a few defaults or a slowdown in China. What I do think will be much worse than 08-09 is the political climate which may drive policy makers to go much further than before. I won’t speculate on how and what but suffice to say the climate is ripe for some upheaval.

  4. ray says:

    I’ve been watching Softbank. This paints them in a horrible light given their previous buy-in at $47B valuation. Softbank has set a lot of the pricing for Unicorns and startups. It’s also 51% of the Japanese corp debt market and it’s estimated over 650k Japanese retail investors hold their debt. It seems like the sort of company that could change market psychology should it take a big stumble.

    • Jessy S says:

      Funny you should mention Softbank. The bank wants to throw away $750 million just to prop up the WeWork IPO. That is one message from this Zero Hedge article: https://www.zerohedge.com/markets/wework-now-weighing-ipo-valuation-low-10-billion

      BTW: Zero Hedge is how I found this site.

      • Frederick says:

        Same here Been reading Zerohedge for 10 years and read about WS from their comment section

      • zoomev says:

        Minyanville->ZeroHedge->Wolfstreet … I’m embarrassed to admit to zerohedge

        • roddy6667 says:

          I admit to reading Zerohedge. However, the IQ of the average person in the comments section is below room temperature.

        • van_down_by_river says:

          I went 100% to cash in late 2007 after Todd Harrison warned of a liquidity crisis that would cause the corporate debt market to freeze up. I sat out the entire crisis thanks to Minyanville. It was one of my favorite sites and than Todd moved to Long Island and walked away from Finance journalism. I heard he couldn’t deal with trolls any longer and didn’t want the stress. I miss his writing and insights and wish he hadn’t walked away. I’m grateful for the grief he saved me from suffering during the GFC. Now, I have Mr Wolf’s insights and for that I’m thankful.

      • Andrew A says:

        What are so.e otjer good sites other than wolfstreet amd zerohedge to get good datapoints and intel on what is really happening? Cnbc, bloomberg, wsj are pretty run of the mill

        • DamonW says:

          “Thoughts From The Frontline” is a weekly e-letter by John Mauldin that’s well worth a read. It’s not a blog, so it’s not really a “site” but his thinking is very clear and illuminating.

      • lisa says:

        they’re team-mates. I like them both. Wolf is focussed. ZH aggregates the extremes. Still focusing on that bottomline though.

        Great reads!

    • wkevinw says:

      Given long enough, these “genius” startup, PE, and hedge fund gurus practically always blow up. I saw a good interview with a PE guy. He said it was very important to be successful on your first few investments. – Obviously!- You make a huge killing early, put that away where it will always be, then you start gambling again. You keep your lifestyle no matter what.

      The softbank guy doesn’t strike me any differently than the rest of these people. Steve Jobs, who was obviously a kind of “genius”, almost bankrupted a couple of big companies. Had he not gotten the timing right on the two or three good ideas he had, you would only know him as historical footnote.

      You can name lots of companies with arrogant management (who made lots of money) while managing the company to nowhere: GE, AOL/Time, all the dot.com busts….etc.

    • c1ue says:

      Yes, but keep in mind that Softbank certainly invested with all sorts of ratchets in place – i.e. terms which say that if the valuation goes down from when Softbank invested, that they get more shares.
      This puts a very definite floor on the WeWork IPO valuation.
      I can’t say what it is since I don’t know what the ratchets are, but even going from $47B to $20B valuation is likely to be disastrous for all holders after the founder and first money in shares.

  5. RD Blakeslee says:

    Other market-pumpers have other tales of woe.

    For example, NBC (!) complains “fake news” is hurting companies stock valuations.


  6. Old-school says:

    Something happened this week in the market. I own about 100 grand of PETS, my only stock holding because it has no debt, 6% plus div and a lot of cash. It is highly shorted. It’s considered a small Cap consumer staple value stock. I am still slightly underwater, but it is up 15% this week and momentum stocks are down and treasury yields are up. We will see if there is follow through next week, but maybe these debt fueled no profit stocks are going to collapse.

    • Rowen says:

      Google the “Quant Quake”. ZH has been covering it all week.

    • nostradamus jr says:

      Rotation from momentum (FANGS) stocks to undervalued value plays, sorta like the big boys were forced to look under new rocks that might have a little more future value. This was a big thing last Friday and early in the week. Guess regular index funds will lag, while smaller undervalued stuff explodes for the shirt term, but that spike will fall soon enough. Seems as if hot money is chasing yield and lots of portfolio balancing going on with robots adjusting their strategies before any minor or major crash.

    • Wolf Richter says:

      10-year Treasury yields are experiencing the “snap back” that I said would happen, because it always happens with 10-year Treasures. And I don’t think we’re done yet with the snap-back. A 100 basis point jump in yield is common during a snap-back.

      • Lance Manly says:

        Yet another reason for the Fed not to cut rates, as the bond market is coming to them rather for them to have to chase the market.

      • socaljym says:

        This will cause rising mortgage rates, but it won’t matter because there’s a permanent shortage of real estate. Buy now right now (like next week), or be priced out forever.

        Either way, this is TREMENDOUS NEWS for the Socal and Boston real estate markets.

      • R cohn says:

        Nice call!

      • Bam_Man says:

        Yup. Gives the big players an opportunity to re-load and then take more profits on the next Treasury rally. Have seen this movie many times in many bond markets over the past twenty years.

      • RagnarD says:

        I thought the PETS was a joke / play on Pets.com. It Could have been, tho I couldn’t figure where the 6% div fit in the joke.

    • Pinto says:

      IMHO PPT created an huge short squeeze this week, in order that when Wednesday Fomc meeting come, they will say everything is awesome see?
      No need for rate cuts!!!!!

      PS Monday and Tuesday I watched fcel and Fran pos market.
      Wow what a sight to behold they were having such volume that it was more than regular hours!
      Epic that was no pocket change!!

    • cd says:

      Its just sector rotation, the RUT broke out similar to SPX last week, new highs are coming…..hot money at 2.5% is still utterly cheap….treasuries are more costly than SPX index divi..

      what a setup by the bankers and algos…..

      • Wolf Richter says:


        The whole concept of “sector rotation” is a myth. For every share that is sold, there MUST be a buyer (by definition — or there is no sale). In other words, every dollars that leaves a sector via a sale is replaced by a dollar that comes into the sector (by definition). The only thing that changes is buying and selling pressures. So there is more buying pressure here, and more selling pressure there.

        • Wisdom Seeker says:

          Sector Rotation is much more real than “cash on the sidelines”. It’s a market manipulation game where market players selectively apply buying and selling pressure to influence prices in particular parts of the market. They sell or sell-short in one area and use the proceeds to buy another area. If they pick the areas intelligently, move in sufficient size, and get enough market shills behind a bogus narrative, other participants will be spooked or excited by the move. Their reaction adds to the momentum. Then, as weak hands sell the stocks that are dropping and eager beavers buy in on what’s rising, the original players cash out and profit.

          It’s fundamentally the same game as running stops, but on a much bigger scale.

          The interesting part will be seeing what happens next to the stocks that got played. The ones with underlying value will find support and the ones that were bubble-zombies will deflate.

          The other thing you want to do is make note of which market commentators went along with the scam, versus those who rightly questioned why anyone’s valuation estimates would have changed so rapidly as to take 5-10% off the price of so many stocks all at once. Then you know who to trust and who to fade.

  7. John says:

    I love to watch the mindless speculators lose money. I only regret that I will likely have to pay taxes to support them on welfare after they lose it all.

  8. qt says:

    WeWork to become MoviePass once all the speculators head for the exits!

  9. nick kelly says:

    Is Wework screwing up the market or shining a light on it?
    Re: Cramer. Thank god I haven’t had to listen to him, I just read him. I’m surprised CNBC hasn’t reduced their exposure so to speak. Last week the guy was saying everything felt like a ‘trap’ then it was back to ‘buy’
    People who follow him will be aware of his many specific reversals. I believe GE is one of them but not sure. At times he sounds like someone heading for a nervous breakdown. Maybe a holiday would be an idea, at a place with no Wi-fi

    • Rat Fink says:

      I imagine Jim snorts epics amounts of cocaine.

    • fajensen says:

      Cramer, I think, is the stock-nerds WWE-experience. Or maybe it’s a Turkish soap? Always three new conspiracies opening per episode, with very dramatic music and noisy arguments 80% of the running time.

      They got many heroes, losers, storylines and reversals – the good becomes the bad, the bad becomes the good, the good will best the bad with some dirty trick, then the bad will cheat …. on and on, the loud noise, drama and confusion never ends.

      It’s for people who somehow don’t get quite enough bullshit at work!

      • Raging Ranter says:

        It’s for people who somehow don’t get quite enough bullshit at work!

        I like the way you think. :)

    • Frederick says:

      Jim Cramer you mean the guy who was literally screaming “Buy Bear Stearns” 24 hours before going belly up Yeah he’s a great person to listen to alright

      • sc7 says:

        You’d think a miss that big would be a career ender, but somehow, this moron remains on TV.

        • Wisdom Seeker says:

          Re “this moron remains on TV”… There’s a reason for that, and it’s not because he delivers value to his audience. Now look at who his sponsors and hidden supporters are…

      • NBay says:

        I watched Cramer (and CNBC) a lot in ’06-09. I was just trying to learn financial lingo (ie, “basis points) and things to look up.
        Anyway, I definitely remember him often saying he knew Lambert well, that the was a great CEO, and put him on his CEO hall of fame. He often said his original goal in life was to be a sportscaster. Looks like he made it.
        It was also fun to watch the whole CNBC bunch come unglued during the FC, you could see the fear in their professional gambler eyes.

    • California Bob says:

      “I believe GE is one of them but not sure”

      It was. IIRC, he even wrote on TheStreet.com that it was a ‘BUY! BUY! BUY!’ when the new CEO (Culp) came on board; it’s gone down a buck or two since (and I think the site scrubbed that article).

      GE may be worth a look (someday), if they can unload the health care business. I believe the jet engine business is robust–the gov’t may step in to save it if necessary for ‘national defense’ reasons–but ‘power’ is iffy. I’ve been watching it because it should be a fairly ‘safe’ buy for a retiree if they can clean up the house.

      • nick kelly says:

        Have no actual knowledge but would have thought opposite. The jet biz is littered with disasters and bankruptcies (incl RR in the 70s )
        Although Canadians love to blame a US conspiracy for the demise of our iconic Avro Arrow jet fighter, it was never- ending cost overruns with the Iroquois engine that pulled the plug. The Arrow’s air frame was fine but it never flew with its intended engine.

        Harvard (not sure which faculty) says everything medical costs more in the US than anywhere else. Gouging is the norm. Its inflation is always higher than baseline. With the Boomers heading into peak medical demand shouldn’t health care look good?

        Of course GE would still have to execute on Cat Scanners etc.

      • char says:

        Jet engines have three big problems

        !) Flying electric
        2) Less airline subsidies because of CO2
        3) Russian & Chinese engine makers

        and the small problem of more expensive kerosene because electric cars don’t use gas/diesel

        Power has the problem that batteries makes certain types of gas turbines (inefficient but fast starting) disappear from the market and Solar/Wind leads to less wear and tear

        • van_down_by_river says:

          If you’re implying airliners will one day be electric, sorry that just won’t happen. Hydrogen maybe. Natural gas made with hydrogen and CO2 more possible. Both of those options would still utilize turbo-fans. That business has a future.

          Hydrogen is easy enough to make from solar (conversion efficiencies as high as 75%) but using batteries for industrial scale power storage is a terrible idea and way too heavy to power an airliner for 1000 miles.

    • Brant Lee says:

      Is Jim Cramer A millionaire? Billionaire? Living paycheck to paycheck?

      • Petunia says:

        GE owned NBC for a good chunk of the time Cramer worked there. He might be sitting on a load of GE stock in his retirement accounts: pension, profit sharing. Also some business Cramer owns was recently sold and I don’t recall being impressed by the price he got.

        • nick kelly says:

          I wonder what are the synergies between a builder of jets and other turbines and a TV Network?

          At least when Sony bought a US movie studio they (mistakenly) thought it would tie their hardware to the studio’s software (movies)

    • lisa says:

      He’s just like a Trump, on a smaller scale. No grandiosity at his earnings level from his take of the big game!

  10. AlamedaRenter says:

    Will SoftBank be taken down in this mess also?

    • MC01 says:

      No, but expect private flights from Saudi Arabia to Japan to increase in frequency, carrying some very crossed and very powerful men with their battalions of attorneys.
      If I remember correctly Softbank promised their Saudi partners (the Public Investment Fund, PIF for short, and a gaggle of other wealth management funds, the border between private and public being very hazy in the Gulf) 8% yearly return on their investments, which is very unlikely to deliver anytime soon.
      Masayoshi Son managed to personally charm Mohammed Bin Salman into pouring billions of dollars into his “investment fund”, but while the Crown Prince is by far the most clueless Saudi ruler I’ve seen in my life many of his family are very shrewd and consummate businessmen and I fully expect them to take control of the situation and tell Son to start paying up or face the consequences, namely a mass withdrawal which would effectively cripple the Softbank investment fund.

      • lenert says:

        Or a bone-saw?

      • AlamedaRenter says:

        Was a crazy week for me and didn’t catch much news.

        Did Gov. Newsom sign the law about gig workers being employees?

        Apparently SoftBank is heavily invested in Lyft and Uber…

        It’s the beginning of the end.

        Plus I’ve got a friend that is a manager at Facebook and they are cutting staff…head count is all she talks about.

      • lisa says:

        Those drone attacks came from somewhere, they gotta keep money flowing for the military profit machine. Those investment funds need to keep money flowing to them anyway they can. Trump’s right there to put up some more US lives at the front, since the Saudis sure won’t go out in the heat, and sure won’t get their little pinkies dirty. Did you catch the quote from Zarif:

        Zarif: Saudi and UAE want to ‘fight Iran to the last American’

        Trump’s bowing down and kissing their feet, Putting US lives on the line.

  11. unit472 says:

    There does seem to be a growing number of Flim Flam men trying to sell shares in Unicorns now. The search for profitable investments has made people desperate and it brings opportunity to the Kalanicks and Neumans of the world.

  12. MCH says:

    Son-san is going to be in trouble, but hey, it’s all good, at least he made out with the Uber IPO… right? That’ll cover this loss. Ha ha ha ha.

    Not necessarily derailing here, but speaking of Uber, CA passed the AB5 that forces ride share company to treat the drivers as employees instead of contractors. This is going to be good for a laugh or two. Uber/Lyft are going to fight tooth and nails on this one, because they don’t have a choice, but if this goes, it’s going to hurt Uber massively. It’ll certainly be enough to force them to adapt to a new model, perhaps like the Amazon model of contracting out the last mile delivery.

    So, here is the question, when a unicorn is young and spry, they are wonderful, but what happens when they become old and decrepit? I guess the answer now is that they go IPO.

    • unit472 says:

      Uber is going to have a hard time claiming it is just a technology ‘platform’ when its original moniker was UBERCAB!

      • roddy6667 says:

        Here in China Uber and Didi were fighting over market share. Neither company had ever made a penny of profit. Didi bought out Uber’s China operations. Boy, did Uber pull a fast one, or what? Who would buy a company whose mission seems to be incinerating cash?

        Wait. Didi paid in Didi stock. Who screwed whom?

        • MCH says:

          It’s ok, Apple will be just fine. They have cash to burn, I think Leader Tim ended up dropping a cool $1B like 3 years ago. So, there is always a sucker out there somewhere. At least Apple didn’t invest in Uber.

          But hey, I like Didi, they have nice integration with Wechat.

    • polecat says:

      They get we-worked .. to death.

      I say go ahead – Pull it all down !

    • Wolf Richter says:

      This new reshuffling of the labor law is impacting so many industries, including trucking (owner operators), and I don’t think lawmakers saw this. So it will come under attack from all sides. If it gets signed into law, I think it has a good chance of getting thrown out in court or repealed.

      • Jessy S says:

        Thank goodness it is just California state law. The current legislative body is totally wonkers. They even made it a felony to suspend students for misbehavior in schools while requiring all the colleges in the state to let their student athletes earn money off their likeness. To top it off, a new law requires President Trump to submit his tax returns in order to get on the ballot though a prop measure passed in the early 1970s requires access for all known candidates.

        • Tonymike says:

          How is it “wonkers” to let the players make money off their likeness instead of the college or the lawyers? “But for” their likeness, they would not be exploited. Capitalism should work for them as well. College sports is neo slavery anyway. Have to have drivel to feed the bread and circus viewers.

        • char says:

          Just California? I remember reading that Uber get 50%+ from 7 global cities. Two of them in California.

      • Lisa_Hooker says:

        A lot more than industries. If you can be classified as an employee you lose all cost of doing business expense deductions. Think of the entire gig economy – sole props, one man sub-S corps. Your gross becomes your net. A very sticky wicket. Unintended consequences strike again.

        • Danlxyz says:

          That was my thought too. But if the company reimburses the expenses under an accountable plan, they would not be taxable to the employee and the company would expense them.

        • dr_doomz says:


          “Your gross becomes your net. A very sticky wicket. Unintended consequences strike again.”

          Not unintended at all. The goal is to reduce the independent worker/contractor pool, for (what should be) obvious reasons.

      • dr_doomz says:

        Wolf Richter:

        “This new reshuffling of the labor law is impacting so many industries, including trucking (owner operators), and I don’t think lawmakers saw this.”

        I think they know exactly what the consequences will be. Uber is a convenient excuse. Like killing 10 birds with one stone.

  13. roddy6667 says:

    In the Eighties boom, one of the first canaries in the coal mine to fall off its perch was commercial real estate. All these different companies like Instant Office were offering something identical to what WeWork has now. When office space became cheap and plentiful, they all evaporated overnight.
    Anybody under 50 is too young to remember this. They assume that anything important happened after they entered the job market.
    And get off my lawn!

  14. Javert Chip says:

    Ya gotta like the WeWork CEO’s move to copyright “We”, and then sell it to his corporation for $5M (shortly thereafter shamed into given the money back).

  15. Bobber says:

    What’s interesting is that a company like WeWork has about $10B excess valuation, while an overvalued company like Microsoft might have $300B or more excess valuation.

    Excess valuation is happening all over.

    • hendrik1730 says:

      I am also astounded by many Cy valuations. I may be stupid or so, but I always thought 4-5 times the EBITDA was a fair valuation.

      Unless there are strong indications with proof the Cy is sitting on something spectacularly new and globally asked for ( a cheap superbattery, for instance, with a longevity of 100.000 cycles that can be charged in 5 minutes and weighs 10 times less than what we have today and easy to produce/recycle ) ready for the market place that nobody else has.

      If you pay more, you are very probably being screwed.

  16. Down2Earth says:

    This valuation business is nothing but a GREATER FOOL theory.
    How can a continuous loss along business sustain itself over a long period ? Once listed, you can’t have a lifetime cash flow coming in to sustain your foolish theories of business which are completely against the acceptable norms of business.
    This whole theory of hyped up valuation is simply a superlative PONZI scheme by a small group consisting of so called or alleged visionarie. Their idea is nothing but to palm off these financially hopeless companies to the gullible public.
    Because they very well know that the greed of making a X fold return (as leaked by them in media) would surely bring the retail investors. And since each investor holds a minor number, no retail investor will crib even if the stock goes down. It’s a chance the investor had taken.
    As it is rightly said, public memory is short !!!

    • Rat Fink says:

      It’s amazing what one can do with a bad idea a good PR firm, and a few billion dollars to subsidize the bad idea.

      I was in Mexico City a few months ago and noticed the scooter craze, another massive money burner.

      People zipping past at around 20mph with no helmets and I am thinking

      1. how is this allowed when you must wear a helmet on a bicycle 2. how many scooters end up trashed or lost and 3. how many months until this business goes to ZERO.

      • fajensen says:

        *Everything* is allowed as long as it has something to do with “Sharing – Anything”, “Smart – Anything”, “Big Data/Machine Learning” *and* the decision makers were all invited to those rah-rah conferences and exclusive seminars in “Exponential Thinking” – which is what Silicon Valley brands as innovation these days.

        I do hope that the lads and lad’ettes rip off the motors, batteries and drives from those scooters and use them for something better. It is a free resource after all.

      • MC01 says:

        I was in Augsburg this week for work and just as I was breathing a sigh of relief for the disappearance of those accursed bike “share services” when I noticed a row of “Voi e-scooters” squat in the middle of the central place of one of the wealthiest cities in the world. I took a picture as a reminder and later on, as I was sitting in the magnificent garden near St Anna, I did my homework on the phone.
        “Micro mobility” startup from Sweden, less than a year old, doesn’t seem to have a path to profitability nor to care about it. Where have we heard that before?
        But somebody is paying for those slick presentations and somebody is paying for those scooters, the ultra-expensive office space in Stockholm and greasing the wheels of city governments. My take is like it happened with WOW Air, Primera and the like a lot of pension funds and private banks from Scandinavia are going to eat a whole lot of losses.

        PS: you are not the only one wondering how these outfits and their “customers” can get away with everything when ordinary people get rebuked or fined for far less. As my attorney always say “I did everything wrong in life”.

        • c1ue says:

          It is a little more nuanced than that.
          The e-scooter companies are heavily subsidized by Chinese manufacturers.
          The scam is:
          1) Get a scooter for $400 or less
          2) Get some number of early adopters to pay $1/15 minutes or some such to play with this new toy for free. I can easily see how the first few scooters can generate $100-$200/month revenue.
          3) Show this to investors: Get your money back in 2-3 months, after which it is all profit!

          In reality, the value offered by the scooters is both lower and more expensive than what I talk about above. You have to re-charge them – which means paying people to find low-charge scooters, haul them to places to charge, etc.
          You also have to reposition them. As with most transport, it isn’t symmetrically bi-directional. People use the scooters when they’re in a hurry, but not otherwise. So you have to round up scooters and move them to the times/places people will use them (late for work).
          Then there’s theft, vandalism, obstruction of rights of way, etc.
          The scooters themselves are an ecological nightmare. Imagine just how wasteful it is to buy a new scooter every 3-6 months, because the price is so low that it isn’t worth even bothering to maintain them.
          But electric! Save the environment! Less traffic!

        • Wisdom Seeker says:

          @c1ue you’re close, but you can take it up a level:

          Company making scooters borrows a jillion credits and funds a pseudo-arms-length startup “share service”.

          Share service uses startup funds to buy a jillion scooters and sell investors on its soon-to-be-doomed business model.

          But the scooter factory now has order growth galore, so its multiple (P/E ratio) goes from maybe 10-15 (cyclical scooter business) to 30-50 (growth company).

          Owner of scooter factory of course borrowed to the hilt against his ownership stake, and bought options in his own business through third-party cronies and shell corps just as he was quietly funding the share company.

          The only question is how much central bank free money he can pull down before cashing everything out!

          And the lenders hush up the whole business because they got a slice of the action (as individuals) and their institution can’t afford to reveal the magnitude of the bad debts.

          All this, by the way, is another reason why ultra-low interest rates, ZIRP and NIRP are a disaster for the economy. There are always scams getting funded by mistake, which destroy genuine capital. With rates too low, investors are too desperate for yield and fund too many bonehead scams. And without enough yield to make up for those losers, they’re guaranteed to lose money over time.

        • Realist says:


          There was recently in the financial news over here that the contractors who gather in and recharges those scooters are paid €1 per collected scooter.

          You have to collect a helluva lot of scooters to end up with som earnings after deducting all costs for fuel, truck neded osv ad nauseam.

        • c1ue says:

          @Wisdom Seeker
          Fair points, but I would note that the scooter makers are not financed by the US startup bubble – they’re Chinese companies taking advantage of credit availability there.
          I haven’t looked closely, but it wouldn’t surprise me that these makers are some inland province in China’s local leadership exercising their credit creation capabilities to create a “center of excellence” for scooter manufacture.
          Certainly that happened for bicycles in China with “bicycle sharing” startups around the world.

    • Javert Chip says:



      Another name for your GREATER FOOL theory is “gambling”.

      I particularly enjoy a version of this called craps & blackjack and played in a Vegas casino. Over a couple hours, I get a highly enjoyable adrenalin rush out of trying to beat the biggest & most successful gaming establishments in the world out of $100. I do this about 47 times out of 100.

      I’ll knowingly continue to periodically play this losing game as exciting recreation, but I sure as hell won’t manage my pension fund with this loser strategy.

      However, a surprising number of people do gamble with their investments, including (but definitely not limited to) inexperienced millennials – always the search for the quick, easy, no-skill-required fortune. Just enough of these cockamamie dumb-luck fairy tales come true to inspire millions of others to do the same stupid things. On the bad days, they blame Wall St & Goldman Sachs for ripping them off, and want everybody thrown in jail.

      “Stupid is what stupid does”; Forrest Gump, circa 1994

  17. timbers says:

    This article by Wolf about WeWork just shows us why America needs ZIRP.

    Think creative, people! Get outside your boxes! Evolve with the future before us…that future is ZIRP!

    With ZIRP, we would not have to read about sad stories like WeWork because America will do “whatever it takes for how ever long it takes” like everyone else.

    After all, it’s just part of the tool box. Powell himself has said so numerous occasions.

  18. Harvey Cotton says:

    Private valuations are utterly meaningless and the I.P.O. process is largely a fraud run by gangsters. My girlfriend owns a smoothie restaurant. She can sell me one “share” for $1,000, keep the other 999,999 at the same price, and value her restaurant at $1,000,000,000.

    If she I.P.O.’d, her bank underwriter should balance her needs to raise capital with the public’s need to have a stable and appreciating asset. If the underwriter did their homework, the share price offered should be reasonably close to the price at the end of the first trading session. If it is too high, the newly public company lost out on capital. If it is too low, traders and investors paid too much for their stock.

    Some measure of enterprise value should trump equity value, and especially nonsense private valuations.

    • Javert Chip says:


      You should fully understand that you have forever precluded working on Wall St as an investment banker or capital market specialist.

    • c1ue says:

      Sorry, but the bank underwriter’s motivation is profit. The public’s need doesn’t mean squat.
      If the bank underwriter can generate $5M in revenue for having its analyst’s pump up the stock – via fees on the IPO plus fees on sales of IPO stock to its investors, it will do so.
      Equally, your description of share price dynamics is utterly naive.
      The point of having a first day pop is to try and generate traction for the stock. A stock whose first purchasers have made money, is a stock with a base of believers who will enable the stock to climb higher.
      Even better, if the hype can turn into a frenzy, then everybody wins (except buyers).
      The presumption you’re making is that the stock market is anything but a money raising mechanism for companies going IPO and banksters getting paid in the process.

  19. Sigmund Fraud says:

    @ Marcus: “WeWo” the perfect new nickname…. A tale of Wo.

  20. Xypher2000 says:

    Real estate is the best market to invest, unless the economy is about to collapse, then you are left holding the bag on overpriced crap that no one wants to buy off you, even when you tell them the exorbitant prices you had to pay to get it. Just like a used car salesman.

  21. MD says:

    Negative interest rates…negative bond yields…investors slavering to buy the stock of corporations losing billions…

    Truly ‘through the looking glass’ stuff.

    Personally I think there’s going to be a major reset, and when it happens it’ll happen so fast that it’ll catch most off guard.

    HOWEVER if you believe that irrational, Tweeting presidents, omnipotent money-printing central bankers and computers all following each other trading stocks on ‘momentum’ add up to a good set of conditions around which to form your retirement plans, I suggest you borrow like crazy and BTFD each and every time there’s a wobble.

    Just don’t say no-one saw it coming, and that you weren’t warned!

  22. Leo says:

    I have been following another company, which makes WeWork look incredibly good. The company was valued at billions of dollars, despite clearly being worthless and I was short the shares. Most shocking was that Softabank poured lots of money into this company at peak valuations right before it imploded and went to nearly zero.
    The fact that Softbank invested so much money in a company like this makes me wonder about the quality of their other investments. What do we know about them? Could Softbank really be the big bubble?

    • Jack says:

      Leo ,

      SoftBank is a big FRAUD!

      That is the answer to you Question.

      You’ll be well advised to stay clear from this Company if you’re contemplating investing in it.

      • Petunia says:

        Softbank is playing by the rules the markets have created. If you pay more for a company, it is worth more, regardless of revenue or profit. It’s the same game going on in commercial real estate. If you charge more rent, your property is worth more, regardless of whether it is actually rented. Fake prices, Fake markets.

    • c1ue says:

      You have to look at Softbank’s history. Softbank was founded by Masayoshi Son. He made serious bank through buying early into Yahoo and Alibaba.
      I don’t have any insider knowledge, but it doesn’t take a rocket scientist to figure out that Son is attempting to re-create his past successes by buying into *all* of the high profile companies, expecting that 1 or 2 will be so huge that they’ll pay for all the rest.
      Softbank in turn isn’t just Son’s money, it is all the hangers-on who think Son can capture lightning in a bottle, a third time.
      Of course, Yahoo in 1995 and Alibaba in 1999 are extremely different opportunities than WeWork, Uber and what not today: one was a general internet play – Yahoo as a company has failed but that’s only relative to its peers. The internet has grown so much that Son’s investment was still worth a lot – although arguably Yahoo’s enterprise value, at the time of its Verizon acquisition, was significantly due to its investment in Alibaba.
      So it may be that Son is actually a one hit wonder (Alibaba).
      Alibaba in turn was a play on the growth in the Chinese economy and market. China’s economy has grown 11%+ per year for 35+ years.

  23. Anderson Phillips says:


    I agree with your comment not to invest in SoftBank, however, everything is information and is useful in certain ways. It would appear that the analysis handing SoftBank’s investments have unique parameters they utilize to determine which
    firms they choose to capitalize. Perhaps they are not investing for today but looking 40-50 years ahead; who cares. The point is we should look at their investments over the past few years and determine if a “SoftBank Investment “ is a reliable trigger to short the stock. Don’t bet the house… just the next vacation. Thanks

    • Javert Chip says:

      Difficult for me to accept that any significantly large communist Chinese company (SoftBank qualifies) is allowed to simply respond to market impulses. Communist/socialist economics simply are not sustainable in the real world.

      Favorite USSR communist story:

      Right up to its 1989 collapse, the USSR bragged inflation had not increased the price of bread, first set in 1921. Of course, there was never enough bread available at the socialist market price to feed a hungry population.

      Latin America socialist corollary: Venezuela can’t even provide toilet paper.

      • c1ue says:

        Softbank is Japanese. Japan isn’t Communist, not that China is communist either.
        Please check in your ideology at the door.
        As for the USSR: Russia was a 3rd world, 3rd rate nation in 1917.
        Today it is the nation most able to defend itself against anyone, after the US.
        They defeated the Nazis and raised millions out of poverty.
        Yes, the Soviet Union had all sorts of faults and problems – a not insignificant number of which were due to economic isolation at the behest of the US and UK (and which has been restarted as a tactic recently).
        Equally, China was also a 3rd rate, 3rd world power in 1980. They are now the 2nd largest economy in the world, have raised hundreds of millions out of poverty, and are now a real economic power, though not a military one.
        Not really sure the messaging you’re trying to convey about Communism captures all the details.

        • Javert Chip says:


          For years, I have honestly thought SoftBank was Chinese. Wow! Big mistake.

          The message I was communicating about communism/socialism was its inevitable inability to adequately produce & allocate resources (ref: Venezuela toilet paper, or the current food shortage in Cuba).

          You might claim the US has caused these shortages, but if socialist economies were self-sustaining, they wouldn’t need help from us nasty capitalists. Venezuela has lots of oil but they’re broke & Cuba has magnificent agricultural land but they’re hungry. Again, a productivity & resource allocation issue.

          Xi Jinping and I would quibble with your “…not that China is communist either…” comment; Xi & I sure as hell thinks China is communist…the million+ Uighurs Xi has in “re-education camps” would probably also argue China is totalitarian.

        • Cmeron S says:

          @Javert Chip,
          Aren’t you contradicting yourself in one short comment? On the one hand you say “The message I was communicating about communism/socialism was its inevitable inability to adequately produce & allocate resources” and then “Xi & I sure as hell thinks China is communist”.
          So then explain the “communist” China’s inability to adequately produce and allocate resources!

        • Realist says:

          A little of topic, regarding Russia:

          The US led sanctions against Russia are probably a really bad mistake. This has forced Russia that was dependent on imports to develop its home market industry, especially their food industry.

          I did recently visit St Petersburg and couldn’t help notice that the shelves in shops were bulging with Russian produced food items instead of the imported western products that did fill the shelves before the sanctions were imposed. Ok, the cities in Russia are privilegied areas compared to rural settlements, but the Picture I did get that domestic Russian production has benefited greatly from the sanctions.

          In addition, the US should have tried to keep Russia and China apart, instead the US is doing their best ( read worst ) to drive Russia and China into each others arms …..

        • c1ue says:

          @Javert Chip
          I think the production message about Communism is a lot more complex than the one you put forward.
          Russia has public transport and affordable health care, for example, while the US doesn’t. Does this mean Capitalism has failed? It does, but it doesn’t mean Capitalism has failed in everything.
          There’s no question that the Soviet Union placed a really low priority on consumer goods like jeans and TVs. Starvation, however, was not something that happened there.
          And as you yourself noted – the Soviet Union was under economic embargo pretty much the whole of its existence.
          No country in the world, the US included, can most efficiently make everything itself. Being cut off from all external trade relations is exactly how you get North Korea.
          It is funny you mention Venezuela – because that’s the playbook there only with the extra bonus of the US “holding” Venezuelan gold reserves and Venezuelan company assets (i.e. Citgo) actually being taken over.
          Yes, equally true that Chavez had nationalized, but my point is simply that saying Venezuela can’t provide toiletries and what not is extremely simplistic – if for no other reason than the reality that the wealthy/merchant classes in Venezuela are actively attempting to overthrow the government.
          If the Waltons decided to squeeze the US government by causing all the Walmarts to suddenly have nothing to sell, the effect would be similar.
          In any case, self-sustaining is a more than a little irrelevant.
          The US has not had a “self-sustaining” economy in decades – both in dollar terms and in outright goods – as the ongoing trade deficits and massive imports show.

  24. Kent says:

    A couple of years ago, I thought the market would tank after Uber and Lyft went public. The reasoning being a bit complex: technology is the cornerstone of faith in progress and growth and faith in progress and growth is what drives market valuations. As an IT guy, I know the real technology innovations have been well-plucked maybe a decade ago and companies like Uber, Lyft, We, Snap, et. al. are all really frauds.

    So once the investing community comes to realize that technology innovations are something from the past, faith in progress and growth will collapse as will market valuations. We’ll see, but I have since come to the conclusion most people are just stupid and irrational. And can stand to lose a lot of money.

    • GeorgeO says:

      @ Kent. I have been a Business Systems Analyst for several decades and I have become much less enamored of IT than the average person (and most investors). While IT in general has been a very good thing for America, IT does not prevent stupidity and poor judgement. Even ‘big data’ which has been greatly facilitated by IT has huge short comings as I have watched companies use their data to come to the wrong conclusions and move in very unprofitable directions. I am currently consulting for a health care company that is having a very hard time producing a health ID card without lots of bad data (names, plan codes, addresses, etc.) on it. I mean, we were producing accurate health IT cards in the 70’s.

  25. RD Blakeslee says:

    “(Russia) is one of the most beautiful countries in the world. The people are friendly. The people are warm,” he said. “And when I came here I did not understand any of this. I was terrified of this place because, of course, they were the great fortress of the enemy, which is the way a CIA agent looks at Russia…Throughout history, exile meant being cut off from society, “a punishment worse than death”. But exile did not mean that any more, he said. He could communicate with students in New York via video and three hours later do a similar event in Germany.” – Edward Snowden


    So, Snowden discovered that adherence to a place (U.S.) was a state of mind. Modern technology makes anyplace happily possible.

    There is a similar discovery to be made by us ordinary citizens regarding “exile” in the U.S. countryside, I think.

    Last night, I listened to Brahms requiem, conducted by Otto Klemperer Something no one can do in person but everyone can do by DVD, everywhere.

    Get out of town and under the radar, folks!

    • Nicko2 says:

      America’s reach is great and it’s memory long, Snowden will be caught one day….perhaps when Putin finally kicks it and a new regime is in place. There is no where for him to run. Similarly, the FED holds the fate of the world in it’s hands, where it goes, the world will follow.

    • Javert Chip says:

      RD Blakeslee

      “…Modern technology makes anyplace happily possible….”

      I doubt it…and interesting that you use Bach’s requiem (AKA: Mass in B minor) as an illustration of happiness.

      Russia has always viewed its “citizens” as servants to the state. From the revolution to the end of WWII, roughly 30-40M Russians were explicitly murdered by the state or war (academics are unclear on numbers because nobody in Russia cared enough to keep track, not even to the nearest million).

      Snowden is merely a bright, shiny object, currently of use to the Russian state because he aggravates the US. Woe be it to Snowden when Russia perceives his “state of grace” to have expired.

      ps: Cubans really aren’t too happy at the moment. Perhaps you could send them some inspirational “happy food” music.

      • char says:

        Cuba is capitalistic now so i would blame it on capitalism. ;-)

        • Javert Chip says:

          Where on earth did you get the idea Cuba was capitalist?

          Cuba has been solidly communist since 1959. Miguel Díaz-Canel (Cuban president), the Cuban army, and the Communist Party of Cuba sure think Cuba is Communist.

      • timbers says:

        “Snowden is merely a bright, shiny object, currently of use to the Russian state because he aggravates the US.”

        I seriously hope you don’t think that is only what Snowden is.

        I mean, they way you talk about Snowden and Russia I think is best reserved for the criminals, mass murders, and mass slaughters right here in the Government of the United States of America.

        I do very much hope you compare the tens of millions the Russian government killed to the tens of millions our 2 previous Presidents – Bush and Obama – killed…all very much recent history as in the last 25 years.

      • MarkinSF says:

        Brahm’s Requiem – completely different beast

  26. Beans baby says:

    Wolf, I would love to hear your thoughts on the SDC IPO this week. It didn’t do well, but is well short of We’s 79% loss of value. SDC is losing money, has regulatory issues a la Uber (with a twist – unlicensed provider of dental services) and has a number of non-public competitors already in existence. The business model is technology based – Invisalign has been in the market a long time – so probably fairly easily repeatable. The product itself has gotten many complaints so doesn’t appear to be widely loved by consumers. So lots of reasons to be concerned about SDC’s future growth as well as its ability to become profitable. Is SDC different that We, or is it a variation of the same theme – get original investors wealthy while setting up public investors to take a financial bath? If they are We, they why did they not see steeper losses with the IPO, or is that likely to happen with time?

    • c1ue says:

      SDC is losing money, but that itself isn’t necessarily an issue.
      They lost $32.8M on $146M (-22%) revenue in 2017, $74.8M on 423.3M (-17.7%) revenue in 2018 and are down $52.9M on $373.5M (-14.2%) revenue in 2019 to date (all from their S1).
      This looks like a nice trend, but there are suspiciously lower relative cost of revenues and general/administrative expenses: cost of revenues was $64M vs. $146M (43.8%) in 2017 but $134M vs. $423.3M (31.7%) in 2018 and $83.6 vs. 373.5M (22.4%) in 2019. Did the material costs for their products really fall almost in half in 2 years?
      G & A costs were 48.2 (33%), 121.7 (28.8%) and 96.5 (25.8%) respectively. Given the massive growth, this would also bear looking into.
      Were I to consider investing into this company, I’d look hard into these 2 numbers as they comprise the majority of the reduced losses. If shenanigans were made to “adjust” these numbers as opposed to increased economy of scale causing the improvements, it would change the narrative completely.
      The marketing expenses look reasonable at first glance.

  27. MarkinSF says:

    Isn’t this the company where the Chairman and CEO, Adam Neumann actually purchased commercial real estate and then leased those offices back to WE Work for personal gain? In addition, he and his wife own 6 additional buildings that We Work will actually purchase from Mr. Neumann to lease out (hence the future revenue numbers). Not to mention that the IPO deal is led by JP & Goldman. Obviously a deal like this would go through a serious diligence process and this conflict of interest would be apparent at first glance. Our trusted investment advisers.
    This obscene valuation (even $10B) results from investors willing to throw huge chunks of cash at these kind of endeavors that are really just schemes to create a few new billionaires at the expense of economic activity that will provide something of lasting value that benefits society.

    • Tonymike says:

      PONZI SCHEMES. Should be criminal. Also, I read that the wife can name the “next” incoming CEO. Crazy and a fool and their money are soon parted.

      • MarkinSF says:

        Oh and the wife! She envisions (and promotes) herself as some new age enlightened soul who studied Buddhism at Cornell and studied under many masters including the Dalai Lama. Together this husband and wife team own 5 personal properties at a cost of $80m (don’t ask where the money comes from). One of purchases was for an estate somewhere in Long Island that they got for $15m back in 2016 that is now valued at less than $6m.

  28. Dan says:

    The insider fight must be something to see. Maybe WE Whatever will list in China instead to take advantage of a bigger group of idiots.

  29. nostradamus jr says:

    With a major rotation in the market (last week) from momentum equities, towards value plays, portfolio managers will be less likely to take dumb bets on overvalued stupid hyped IPO garbage. At this stage in the volatile cycle, it would be very risky to take on shares of anything that will drag down future performance, and in terms of a portfolio, it’s doubtful anyone would use this garbage to hedge something, because it’s simply too expensive and risky. If this thing survives, some may pick it up much later at a very steep discount and then maybe use a cost average strategy to mop up losses.

    See: Part of the issue is that WeWork’s mid and late-stage investors were poised to reap huge gains at a $47 billion valuation, but far less at a $20 billion valuation or below.


    • Javert Chip says:

      nostradamus jr

      re WeWork (or whatever they call themselves):

      Bloomberg’s Money Stuff newsletter by Matt Levine discussed Goldman Sachs’ 1ST WeWork IPO road show valuation at $65B; now it’s rattling around at $15B.

      SoftBank has invested about $10B in WeWork, but I suspect much of that total represents investments made at lower valuations that have been restated (inflated) to reflect the latest (fairly small $2B) investment at the highly inflated valuation of $47B.

      BOTTOM LINE: If there is an IPO at less than $47B valuation, SoftBank may have some ‘splaining to do, including billions of write-downs.

  30. Island Teal says:

    Remember…In all of these examples:
    “The stock is the product”
    The Investment Bankers and the “Founders” dont really give
    2 s…s about the what they produce or sell !!!

  31. timbers says:

    With oil fields being blown up in Saudi Arabia, I guess the Fed better start spending a lot more time worrying about Global Economies.

    But not fly-over-country. It’s not a global economy – it’s domestic like the rest of us.

    Maybe some more baby step rate cuts, then QE, followed by NIRP.

  32. Michael Engel says:

    Iran devalued ARAMCO IPO, the biggest ever. Oil embargo will break the DOW back.
    Fed might not cut rates.

    • Wolf Richter says:

      Michael Engel,

      The US is the largest oil producer in the world and has been the largest natural gas producer in the world for years. This is a huge industry in the US, with lots of manufacturing, professional services, and finance and insurance services attached to it. The jobs in all these sectors are well paid. And these workers are consumers and spend a lot of money.

      If the prices of oil and gas jump due to some kind of event, such as you mention, this industry will go into absolute overdrive in the US, and within weeks! This will instantly pull industrial production out of its doldrums, and it will crank up services.

      US net imports (imports minus exports) of petroleum and petroleum products have shriveled to near nothing this year. A US production boom, as would be caused by a spike in prices, would turn the US into a solid net-exporter.

      In terms of GDP and employment, this would be one of the better things that could happen to the US economy.

      Saudi Arabia has long lost its stranglehold over the US economy. And they know it.

      • Nostradamous Jr says:

        My Dear Mr. Wolf,

        FYI: Texas oil may not be able to rush to the rescue, as usual, it’s complicated …

        Complicating matters further for Texas shale drillers is the increasing shift of the oil slate to lighter forms of crude. Oil coming out of the ground in West Texas was light to begin with, but as drillers begin to shift increasingly from the Midland to the Delaware basin, oil is becoming lighter and lighter.

        The refineries along the Gulf Coast are not equipped to handle oil that light. It is typically mixed in with other streams to create WTI, but rising volumes of ultra-light oil are forcing changes. Instead, the industry is beginning to separate out oil of different qualities, forming new grades, as Reuters reports. In addition to WTI, markets are opening up for West Texas Light (WTL) and even West Texas Condensate (WTC). These newer, lighter grades are trading for discounts, which means that some companies are selling their product for prices well below the prevailing WTI price.

        • Wolf Richter says:

          Yeah, people have been worrying about the lighter grades for years. But so far, so good. It’s all getting worked out, as you pointed out. No one is throwing away or burning the lighter grades of crude. There is a market for them, in one form or another, in the US and overseas. Unlike some of the associated natural gas that, lacking pipeline infrastructure, gets flared.

          So yeah, some US grades trade at discounts compared to WTI. Some of it has to do with lack of pipelines and reliance on more costly oil trains, and some of it has to do with the grade. So what?

          That the lighter grades of the Permian trade at a discount is no biggie (some of it has to do with takeaway capacity). And it’s not the only one. For example, Western Canadian Select currently trades at a discount of around $12 to WTI.

          The fact is lighter grades of crude are being dealt with. That’s what this industry is really good at: dealing with challenges.

      • van_down_by_river says:

        I agree, this news should be great for the stock market. I expect the market to surge in the coming week – higher oil prices, uber-dovish Fed, Draghi doing what Draghi does – things are looking good for those who trusted that things will always look good for Wall Street.

        But, don’t lose sight of the fact that 1) the U.S. produces 12 million barrels/day but consumes 19 million barrels/day, that means the increased cost of 7 million barrels/day will subtract off GDP 2) the consumer, that everyone touts as doing well and holding up the economy, will likely be spending more for gas.

        • Wolf Richter says:


          “1) the U.S. produces 12 million barrels/day but consumes 19 million”

          You’re mixing two different things — and I see this a lot:

          The US produces about 20 million bpd of combined petroleum and petroleum products (including about 12 million bpd of petroleum).

          The US consumes about 20 million bpd of petroleum products (no one consumes petroleum).

          Hence net-imports (import minus exports) of petroleum and petroleum products have shriveled to almost nothing. In other words, while there is a lively trade with the rest of the world in petroleum and petroleum products for various reasons, on a net basis, the US produces nearly as much as it consumes. By next year, at the current trend, the US will become a net exporter of combined petroleum and petroleum products.

  33. Michael Engel says:

    1) Dhahran is burning. Dhahran was built by CVX, Texaco & XOM.
    King Faisal confiscated it. He didn’t last long.
    2) The CPI is up, car sales are up, retail sales are up and oil
    will jump, like the DOW last week, thanks to Iran, before coming to UN by the end of the month, facing Trump …
    3) From July 2019 low, the DOW rallied.
    4) when the DOW crossed Jan 2018 peak, a resistance line,
    volume spiked. The DOW made a new all time high.
    5) On the way down, crossing Jan 2018 resistance line,
    the DOW gap. Chaos days returned to the chart after 6M of tranquility.
    6) Aug SPX & DOW line chart is an inverse H&S.
    7) Somebody pushed the DOW up, in a rush, before Fed decision next week.
    10) Perhaps the same people who sent the
    DOW down during the month of Dec, into Xmas massacre, in order to destroy the shopping season.
    11) Iran out maneuvered and out smart those guys.

  34. Eastwind says:

    I think WeWork has performed a valuable service for the unicorn IPO market. They have finally established an upper bound on the number of red flags investors will overlook before saying ‘no thanks’. Depending on how/what you count, the limit is apparently about 6 distinct red flags. Here’s a list from a seekingalpha article I read:
    – very bad financials
    – financials suddenly improve right before the ipo
    – multiple share classes with reduced voting rights for ipo share class
    – ethical lapses
    – opaque corporate structure
    – obscuring prospectus language

  35. The market is by turns becoming a “socialist” venue. Forward looking business plans arise and Wall St rushes to fund them. We have slipped imperceptibly into this government sponsored economic model, where “we keep the profits, you take the losses”, and the profits are shared and a matter of national security, as well. You may not agree about how much the average US political constituent benefits, I would say this market’s performance validates the current president. Ray Dalio says he is worried that capitalism doesn’t work for everyone. So buy your own cubicle and start a business. The billions in funny money are of no consequence if the small business failure rate actually drops. If government made this IPO, WeWorks a GSE, this idea would be soundly trashed, if the Fed lowers rates to zero in order to accommodate the venture, that’s okay. Non Sequitur to that if the old capitalists “Standard Oil” start making too much money the Fed will raise interest rates immediately. NS to that, there is not much difference between Wall St Socialists and Corporate Libertarians.

  36. nick kelly says:

    I wonder what are the synergies between a builder of jets and other turbines and a TV Network?

    At least when Sony bought a US movie studio they (mistakenly) thought it would tie their hardware to the studio’s software (movies)

  37. Wander Lust says:

    I figured after the ’07 / ’08 market meltdown people would realize that everything (EVERYTHING) that comes out of Cramer’s mouth is completely contrived ….. and not by him.

  38. andy says:

    This time Cramer has the mail: The We Co should be renamed The Bell Co.

    Because it is ringing the top of the market loud and long and clear.

  39. CreditGB says:

    I’m late to this party, but $1.6 billion loss on $1.8 billion revenue? The founder is selling out, and SoftBank,…. did I see with over $10 billion…. stuck in this quick sand, is valuing this collapsing scheme at how much?

    I guess I’m supposed to be impressed by the “in crowd” who will buy this dumpster fire and essentially bail out the original losers, Newmann and Soft Bank.

    I think I’m gonna pass on this one.

  40. lisa says:

    A lot of people just don’t understand “why” the business model of UBER, WEWORK, and I will also include FBK are bad business models. The only way to comprehend why is to watch the movie the Lunchbox. At times it can be boring, at least it was for me. However, the real message in that movie is what the business model is based on for the Dabbawalas to survive. They have a lifelong income based on their work. You need to notice in the dialogue that there is a little passing comment about some students from HARVARD….. If you don’t pay attention, it’s real easy not to get the whole message. It’s quite real, and not really subtle, and very symbolic. That’s a real hint courtesy of me. I should really say it’s courtesy of my son, as he’s the one who texted me to watch it. Initially, I really didn’t understand why at all. It’s the only movie I have paid for on AMAZON. Now, it’s free……

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